New options allow Cedar Fair to fight hostile takeover
From the Sandusky Register…
Apollo’s takeover bid may be gone, but Cedar Fair officials already are preparing for another possible takeover attempt.
The amusement park chain has prepared a poison pill to feed any would-be predator trying to gobble up the company in a hostile takeover bid.
The company filed the poisonous rights plan this week.
It was created “to ensure that all unitholders receive fair and equitable treatment in the event of any hostile takeover attempt to gain control of the company,” Cedar Fair leaders explained in a news release.
Cedar Fair filed documents with the Securities and Exchange Commission explaining the rights plan would be triggered if any company acquired 20 percent of more of Cedar Fair’s outstanding units. The plan has several provisions designed to make it harder to take over Cedar Fair against the wishes of the company’s management.
Under one scenario, for example, each current unitholder would have the right to buy $20 worth of additional units for each unit the investor owns, at a price that’s essentially a two-for-one deal.
“Assuming a value of $10 per unit at such time, the holder of each valid right would be entitled to purchase four units for $20,” the document states.
Adding more units would dilute the ownership of the company attempting the takeover.
Such poison pill options are rarely exercised. The point is to force any company trying to take over Cedar Fair to negotiatiate with the company.
The provision also buys Cedar Fair time to consider its options as it attempts to deal with $1.6 billion of debt, said Jeremy Jacobs, a Cedar Fair spokesman.
“The company is aware that the credit markets seem to be improving and it’s talking with its banks in that context to see how they can address the capital structure to the benefit of unitholders,” Jacobs said.
Cedar Fair carries $1.54 billion of term debt, $640 million that matures in 2012 and $900 million that matures in 2014, said Stacy Frole, director of investor relations for Cedar Fair.
“The rights plan was not adopted in response to any specific effort to acquire control in the company,” Frole said.
Texas investment banker Geoffrey Raynor holds about 18 percent of Cedar Fair’s outstanding units, much of them through Raynor’s company, Q Funding.
On Tuesday, the same day the Apollo and Cedar Fair deal fell through, Q Funding filed an SEC document stating that it had been approached by “certain holding company bondholders” to discuss the possibility of merging Cedar Fair with Six Flags.
“It became apparent … that these holding company bondholders were likely going to control Six Flags, Inc. and, since then, there have not been any additional conversations with such bondholders,” the document said.
The document didn’t identify the bondholders and a spokesman for Q Funding declined comment.
The Reuters news agency has reported that a group led by Stark Investments is poised to take control of Six Flags under a new restructuring plan filed by the bankrupt company.
The speculation about Six Flags and Cedar Fair hasn’t hurt Cedar Fair’s unit price. The closing price Wednesday was $12.87, up 50 cents from the closing price the day before.