What’s next for Cedar Fair?

From the Sandusky Register


Cedar Fair Entertainment Company is nearing a crossroads as critical decisions loom.

The company’s board of directors is searching for someone to replace Dick Kinzel, 70, a long-respected amusement park operator who has served as Cedar Fair CEO since 1986.

Kinzel has been pivotal in building the company into the undisputed roller coaster capital of the world.

The board, meanwhile, is under pressure to hire a new chairman who has no previous ties to the company.

The board is also being asked to increase cash payouts for investors.

Cedar Fair itself, meanwhile, may even be targeted for a merger with the rival Six Flags amusement park chain.

As the decisions are made, local officials will be watching for any effects on Sandusky, home to Cedar Fair’s corporate headquarters and home to its flagship park, Cedar Point.

On Jan. 11 unitholders were called to a special meeting by dissident investor Geoffrey Raynor, where they voted on two proposals from Raynor’s group of companies, Q Investments.

One proposal: Appoint a new chairman of the board — someone with no ties to Cedar Fair.

Kinzel currently serves as president, CEO and board chairman.

The other proposal: Make cash dividend payments to investors a higher priority, rather than focusing on paying off the company’s debt.

Preliminary results show the proposal to obtain a new independent chairman passed overwhelmingly, Kinzel said at the Jan. 11 meeting.

The outcome of the other proposal was too close to call, Kinzel said, and the vote will be announced in “several days.” As of Friday afternoon, the official tally still hadn’t been released.

On Dec. 6 Cedar Fair’s board said it’s looking at CEO candidates from inside and outside the company, and it hopes to announce a hire by the end of June.

But the vote for a new board chairman could complicate the search, since Q Investments is pressing for the new chairman to be hired as soon as possible.

Ultimately, the new chairman ought to be allowed to participate in the hunt for a new CEO, said Scott McCarty, portfolio manager for Q Investments.

“We would like the new chairman to have a significant role in the process,” McCarty said. “It serves all unitholders the best to have a truly independent chairman when selecting a new CEO.”

Cedar Fair’s board said it’s not bound by the unitholder vote, and board members haven’t revealed just how quickly they’ll move to name a new chairman.

Kinzel and other Cedar Fair officials declined repeated requests for interviews last week.

Even if Kinzel leaves his post as chairman, he’ll remain on the board — in June 2010, he was re-elected to a new three-year term.

Jay Barney, a professor at the Fisher College of Business at The Ohio State University, said the unitholder vote on the new chairman suggests Cedar Fair will consider bringing in an outsider to fill the CEO’s spot.

“It would be difficult for an insider to tell a convincing story to the board that they were distinctive enough from the prior leadership that shareholders would be satisfied with that,” said Barney, who specializes in corporate management.

And given the role Raynor has played in recent Cedar Fair decisions, “obviously, whoever they get will have to pass muster with this guy,” Barney said.

Numerous amusement-park industry analysts say Kinzel has earned a reputation as a skilled amusement park operator.

Financial analyst Jeffrey Thomison, a vice president at Hilliard Lyons, has followed Cedar Fair for years.

Thomison, who knows the management at The Walt Disney Co. quite well, said Disney executives admire Kinzel.

“Several times in the past they have commented on Dick being a very skilled park manager and businessman,” Thomison said. “He has the respect of the industry.”

Even Kinzel’s critics at Q Investments praise his skills.

While criticizing Kinzel’s “poor financial decisions,” for instance, McCarty also said Kinzel is a proven amusement park operator.

Q Investments wants the ability to nominate members of the Cedar Fair board, but Cedar Fair’s board members said there is “currently no procedure” for investors to do that.

Q Investments filed a lawsuit over the dispute in Delaware in November. The issue is still in litigation.

Kinzel alleges Raynor’s ultimate goal is to merge Cedar Fair with the Six Flags amusement park chain. Six Flags filed for bankruptcy in June 2009 but left restructuring in May 2010.

Q Investments has sidestepped questions about any proposal to merge Cedar Fair and Six Flags.

“Our focus right now is just trying to get the best corporate governance policies implemented at this company,” McCarty said. “If we fail to accomplish that, then we can talk about the next steps.”

The new CEO will have to decide if Kinzel’s policies should be preserved.

Chief among those policies: Keeping the corporate headquarters in Sandusky and investing heavily in Cedar Point.

Thanks largely to Kinzel, there’s little disputing Cedar Point’s status as the best amusement park for thrill seekers, not only in the U.S. but in the world.

Amusement Today has voted Cedar Point “Best Amusement Park in the World” for 13 consecutive years. And the park’s 75 rides remain top draws among all amusement parks.

The park reached its peak attendance in the 1990s, thanks to economic declines in nearby cities like Cleveland and Detroit.

Attendance at Cedar Fair’s northern parks, including Cedar Point, rose 3.7 percent last year compared to 2009, but attendance also soared by about 18 percent at the company’s southern parks.

Closing down a company’s headquarters and moving it is an expensive proposition, and it’s hardly a casual decision, said Barney, the OSU professor.

Still, hiring a new CEO “puts it on the table, where it wasn’t on the table before,” he said.

McCarty and Thomison both said they believe any new CEO will continue to spend money to keep Cedar Point fresh.

“It’s a very productive asset,” said Thomison, who noticed the park seemed very busy when he visited last year. “I can’t see any reason why a management team would de-emphasize the park.”

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