Leland Wykoff

Today local newspaper the Sandusky Register reports on regional investors questioning the proposed merger between Cedar Fair and Six Flags. Quite interesting reportage: https://sanduskyregister.com/news/503820/rotten-merger-deal-raise-red-flags/

Once upon a time Cedar Fair planned to open a modest mass market hotel at Canada's Wonderland. Announcing the project way back in August 2018 plans called for a co-branded Hyatt Place and Hyatt House 203 room facility to welcome guests by 2020. The hotel was regularly mentioned and highlighted in analyst conference calls--until it suddenly wasn't. Cedar Fair confirmed the project had been abandoned when questioned by a shareholder seeking progress reports. Cedar Fair spokesperson indicated the lengthy government permitting and approval process would have to start over fresh if a project was later initiated. Oddly, Cedar Fair spent a good deal of time and money on a project that would not come to fruition. Now it appears a new project may well be underway up North. A trademark application has reportedly been filed for a hospitality development which suggests a project much beyond the scope of a cobbled together Hyatt may be in the works: Here is a link to the Hyatt Hotel announcement from August 27, 2018: https://newsroom.hyatt.com/082718-Cedar-Fair-to-Open-New-Hyatt-Place-and-Hyatt-House-Hotels-at-Canadas-Wonderland-near-Toronto Given the proposed merger with Six Flags it is not clear if this hotel project, and other expansions, may be abandoned as austerity budgeting could be ushered in and grip the combined SIX/FUN company. In any event, hats off to UrbanToronto.ca for reporting on these developments.

Here is a quick review of the "dirty dozen" crimes Disney allegedly committed in relation to Reedy Creek Improvement District:

Link to 72 page audit report: https://dw-wp-production.imgix.net/2023/12/CFTOD.pdf

Disney benefited for decades as a result of the Florida special Reedy Creek Improvement District. An audit of the district has turned up devastating allegations and examples of abuses of power including property tax issues, failure to deliver promised developments, bond and securities issues, evading Florida Sunshine Laws governing open government meetings and records, gifts funneled to politicians, operating ghost cities, bribes, and a host of other violations. A good overview of the issues are in the video link below:

A big elephant is in the proposed merger room. Expansive press releases from both Six Flags and Cedar Fair fail to address the possible negative tax implications of this transaction. Cedar Fair trades as a Master Limited Partnership which carries with it special tax benefits to Unit Holders. Should this merger result in conversion to a regular corporation, such as the mentioned C Corporation buried in paragraph 14 of the press release, tax implications for both profitability, unit holder payouts/dividends, and other issues are not directly addressed, or in fact, acknowledged: "Upon closing of the transaction, the combined company will operate under the name Six Flags and trade under the ticker symbol FUN on the NYSE and will be structured as a C Corporation." This is quite the omission.

For a refresher please re-read my post from September 1st concerning Matt Ouimet's sudden and shocking departure from the Cedar Fair family: This sudden move should have everyone thinking one name. Disney. Ouimet played significant roles at Disney in his earlier career. He developed Disney Cruise Line, oversaw the refreshment of Disneyland in preparation of its 50th anniversary, and was involved in the development of Disney time-share products. Currently Disney is facing challenges galore. Speculation circulates Disney may even be broken into two companies--one comprising the Parks/Resorts, retail, licensing of merchandise, and other similar business lines. Should this come to fruition Disney will be searching for executives to lead the spin-off businesses. Skill sets Ouimet is uniquely qualified to fill. Following Ouimet's tenure at Cedar Fair as an extremely effective and transformative CEO, he was tapped to serve on the Board of Directors in a role created to allow him to seek out development and acquisition opportunities to grow Cedar Fair. In this new role Cedar Fair failed to make any significant park acquisitions until 2019 when it was announced two Schlitterbahn Waterparks and Resorts in Texas would be acquired. Quickly thereafter Cedar Fair announced the acquisition of Sawmill Creek hotel, golf course, and marina in the Sandusky area. These acquisitions are minor when compared to the sale of Great America property in California with only an 11 year operating sale-lease-back agreement in place. Read this quote from the Cedar Fair announcement of Ouimet's departure carefully: “I am extremely grateful to have been a member of the Cedar Fair management team and board of directors,” said Matt Ouimet. “I have great confidence in the Company’s current leadership team and will enjoy following their future successes.” Could Ouimet be foreshadowing a similar future role with another company overseeing acquisitions and development of entertainment, waterparks, amusement parks, and resorts? A position in which he would be looking for strong management teams overseeing portfolios of desirable cash flow positive properties ripe for application of Intellectual Property assets to leverage value, attendance, and profitability? If so, Ouimet would be keen to "enjoy following [Cedar Fair's] future successes" and possibly being a part of that bright future.

Stranger combinations have happened. Carnival, the K-Mart of cruise lines, merged venerable Cunard into their family of brands, rather successfully. This was accomplished by maintaining brand integrity of Cunard. It is not clear, at this point, if brand integrity will be maintained, much less expanded, by legacy Cedar Fair parks. Should legacy FUN Parks take on the Six Flags moniker it could damage the premium consumer perceptions of those properties. Customers would suddenly come to equate a Six Flags Kings Island with the likes of a Roses Express discount store.

Will Cedar Fair really be majority shareholder? Note the shareholders of FUN will only have a slight edge of control at 51.2 percent. However, just as importantly, the new proposed board of directors will be comprised of an equal number of members from both Six and Cedar Fair, directly from the FUN press release: "Following closing of the transaction, the newly formed Board of Directors of the combined company will consist of 12 directors, six from the Cedar Fair Board and six from the Six Flags Board." Compounding this equal representation on the proposed new board, is the carryover of Six Flags staff. Given both Six CEO and CFO are given prominent positions political battles for internal direction and control are quite likely to develop. Cedar Fair appears to be the controlling party only in Fantasy Land.

Where to begin with this delicious story of a FUN/Six merger-in-the-works? Lets start with former Cedar Fair CEO, and Board Member, Matt Ouimet's rather unusual statement, September first, as he unexpectedly resigned his FUN board seat and special role overseeing development and acquisitions: "I am extremely grateful to have been a member of the Cedar Fair management team and board of directors, I have great confidence in the Company's current leadership team and will enjoy following their future successes." As I noted and posted in this forum at that time: "Could Ouimet be foreshadowing a similar future role with another company overseeing acquisitions and development of entertainment, waterparks, amusement parks, and resorts? A position in which he would be looking for strong management teams overseeing portfolios of desirable cash flow positive properties ripe for application of Intellectual Property assets to leverage value, attendance, and profitability? If so, Ouimet would be keen to "enjoy following [Cedar Fair's] future successes" and possibly being a part of that bright future." And here we are. Meanwhile news at Disney has gone from bad to worse. In the last week Disney news progressed into the realm of bleakness: Daily Wire announced, on Disney's 100th anniversary no less, they would be releasing a live action film adaptation of the classic tale of Snow White and the Seven Dwarfs just in time to compete with the much maligned Disney criticized woke Snow White revised release date. Disney is staring down an $8.61+ billion dollar payment to theme park rival and media competitor NBC Universal to complete the purchase of the remaining third of Hulu. Disney theme park attendance is widely reported to be dismal, perhaps in large part due to punishing price hikes, which is expected to suppress Disney revenues further, going forward. Disney recent film releases have been resounding flops failing to reach revenue expectations and generating losses. ESPN is on the block, as are other properties such as ABC, according to reports. Enter South Park. Broadcasting a devastating parody Special Event delving into Disney, CEO Iger, Kathleen Kennedy at Star Wars and Marvel divisions, highlighting serious management missteps, failures, gender and race swapping in classic stories, and the recent collapse of Disney shares by 60 percent. Enter Nelson Peltz. Activist investor extraordinaire who has drastically increased his Disney holdings as he promises a proxy fight (if necessary) to seek "multiple" board seats to shake-up Disney. Possibly selling off the Theme Park Division, and other properties and assets, to restore historical levels of profitability and growth opportunities to the company. Thousands of new layoffs are expected. Scuttlebutt suggests CEO Iger may be on his way out prior to his contracts end. The South Park Special is so severe none other than Vanity Fair felt the need to publish an article exploring the spot on episode: https://www.vanityfair.com/hollywood/2023/10/south-park-takes-aim-at-the-woke-disney-culture-wars Spoiler alert: South Park has announced it is a trilogy, with two more specials to soon drop. Like a shoe. Given this landscape it might make sense for Cedar Fair to acquire Six Flags. Combined they could fend off subpar offers from competing players in a consolidating industries of theme parks, entertainment concerns, and IP properties looking for new channels to expand customer engagement and acquisition. Should Disney spin-off a Theme Park entity it would likely be seeking growth opportunities in prime regional parks such as those held by Cedar Fair, and possibly Six Flags. Merlin Entertainments was bought out by private equity Blackstone and is looking to expand. Sea World Entertainment would become a small fish in a big pond should a Cedar Fair Six Flags merger consummate. Herschend Family Entertainment would be in a tight corner with limited expansion opportunities. Tomorrow morning Cedar Fair has a quarterly conference call with analysts. It is expected terms of the merger may be announced in this call scheduled for 10:00 am EDT (link to listen live to the call below). Given the dynamic repositioning, branding, expanding, and turmoil in the Theme Park business, what are we to make of this reports today by respected sources such as The Wall Street Journal, Reuters, Forbes, Bloomberg, Cleveland Plain-Dealer, many reporting merger verification by at least two knowledgeable sources "unauthorized to speak" on the deal. Translation: it is highly likely to be true, and we can speculate that the "unauthorized" sources may be carefully orchestrated leaks by one or both parties to the proposed merger. Concerning questions of who will be acquiring who. Cedar Fair has the stronger management in industry experience, is has been much more productive in revenue generation than Six Flags (FUN generates more revenue with significantly fewer parks than Six). Six has gone thru CEO's at a frightening clip. Six seems not to enjoy the skill set at the management nor board level to be the acquirer. Also, it is worth noting, FUN has not made a statement repudiating the story. This silence speaks volumes. I feel it is most likely FUN will be the acquirer in this transaction should it come to fruition. However, it is possible Six Flags may be the acquirer in the event such a transaction would resolve sticky issues such as non-compete or corporate governance issues which could stand in the way of CEO and other top management employment due to covenants or other restrictions (or, of course, to trigger enhanced payments to management due to employment contracts). It is likely current CEO Richard Zimmerman many not be ascend to the CEO position of a much larger entity as would result from a FUN/Six combination. One candidate comes immediately to mind who possess the skill sets for the task: Matt Ouimet (remember, his final task and tenure at Cedar Fair was overseeing acquisitions and growth opportunities. Recall his departing words about "enjoy[ing] following their future success." Cedar Fair management could right the Six Flags ship particularly in areas such as revenue management, cost containment, place making, cuisine, parking, marketing, and CRM programs to identify and increase season pass sales and productivity along with food, beverage, and retail revenue enhancements. Six Flags has payed a heavy price for efforts thus far to eliminate serving in the role as cheap day care for rowdy teenagers and youth. Revenues and earnings have suffered. But an important corner has been turned. How might such a transaction be accomplished? Likely a stock swap deal, possibly involving some measure of cash. Due to high interest rates, an all cash deal would likely be prohibitively expensive. Cedar Fair has conserved cash by reducing the unit holder payout (read, dividend) and reducing debt owing to the proceeds of the recent sale of California's Great Adventure. Note Cedar Fair has not projected expected revenue losses going forward which is a bit odd given the CGA revenues will cease with the closure of the park, which could be in as little as three years (possibly longer under the lease agreement). Cedar Fair has not warned of revenue losses as they likely have been planning an acquisition for some time which would more than offset the loss of a major park. Six Flags more than fits the bill. In any event it shall be FUN to listen to the Quarterly Conference Call with analysts Thursday morning shortly following the pre-market release of the financials: https://www.cedarfair.com/news

South Park Panderverse special reportedly delivers devastating sarcasm and take down of Disney management and story telling failures. Panderverse has been racking-up interest at eight times that of Marvel online. The SP episode exposes Disney for poor management in the most serious cartoon manner imaginable. Iger is depicted as Cartman riding the Disney stock price down, down, down. Powerful indeed. Here is an analysis of part of the issues covered in Panderverse Part 1 (of an expected 3 episode outing).

See EEOC news release concerning the legal action the Agency is taking against Cedar Point's parent company(s): https://www.eeoc.gov/newsroom/eeoc-sues-ohio-amusement-park-age-discrimination

Updating legal issues involving Cedar Point provided employee housing and age discrimination targeting older employees, who were told CF policies indicated they were not eligible for housing, are progressing. One of the three known parties to the suite is reported to have reached an as of yet undisclosed settlement with FUN. See article for details and possible updates: https://www.cleveland.com/court-justice/2023/09/eeoc-sues-cedar-points-parent-company-over-housing-policies-for-workers-40-and-older.html

This article, from a couple of weeks back, really hits hard and explains much of the turmoil at Disney. It is worth noting Cedar Fair announced Matt Ouimet's departure from the FUN Board five days prior to the CNBC story breaking. A departure I predicted, at the time, may be related to management issues brewing at the Magic Kingdom. While this article is a rather long read, clocking in at about 12,000 words, it has more plot twists, excitement, and villains than most recent "block buster" Disney film releases. Read. Think Ouimet. Tragic, or magic? https://www.cnbc.com/2023/09/06/disney-succession-mess-iger-chapek.html

This sudden move should have everyone thinking one name. Disney. Ouimet played significant roles at Disney in his earlier career. He developed Disney Cruise Line, oversaw the refreshment of Disneyland in preparation of its 50th anniversary, and was involved in the development of Disney time-share products. Currently Disney is facing challenges galore. Speculation circulates Disney may even be broken into two companies--one comprising the Parks/Resorts, retail, licensing of merchandise, and other similar business lines. Should this come to fruition Disney will be searching for executives to lead the spin-off businesses. Skill sets Ouimet is uniquely qualified to fill. Following Ouimet's tenure at Cedar Fair as an extremely effective and transformative CEO, he was tapped to serve on the Board of Directors in a role created to allow him to seek out development and acquisition opportunities to grow Cedar Fair. In this new role Cedar Fair failed to make any significant park acquisitions until 2019 when it was announced two Schlitterbahn Waterparks and Resorts in Texas would be acquired. Quickly thereafter Cedar Fair announced the acquisition of Sawmill Creek hotel, golf course, and marina in the Sandusky area. These acquisitions are minor when compared to the sale of Great America property in California with only an 11 year operating sale-lease-back agreement in place. Read this quote from the Cedar Fair announcement of Ouimet's departure carefully: “I am extremely grateful to have been a member of the Cedar Fair management team and board of directors,” said Matt Ouimet. “I have great confidence in the Company’s current leadership team and will enjoy following their future successes.” Could Ouimet be foreshadowing a similar future role with another company overseeing acquisitions and development of entertainment, waterparks, amusement parks, and resorts? A position in which he would be looking for strong management teams overseeing portfolios of desirable cash flow positive properties ripe for application of Intellectual Property assets to leverage value, attendance, and profitability? If so, Ouimet would be keen to "enjoy following [Cedar Fair's] future successes" and possibly being a part of that bright future.

You are correct. This policy reminds me of two business tactics from years ago. On point, Dollywood offered in special "After 3:00, Next Day Free" ticket. This promotion ran successfully for many years. It had a triple advantage: 1. It created a sense of a bargain, 2. It increased on-park expenditures, and, possibly most importantly, 3. It reduced crowding by shifting a significant number of park visits to the slower evenings thus improving guest perceptions and reducing operating costs. Some years ago Walmart realized people were not buying snow sleds, dishes, and other winter recreation gear as they were waiting for a big snow event. So Walmart instituted a snow guarantee--buy the merchandise before a certain date, and if no snow arrived over the winter you could return the equipment for a full refund. It worked out extremely well. Early sales increased dramatically thus freeing up display for other merchandise and few items were actually returned. SeaWorlds Weather-Or-Not policy works in much the same way, it reduces the hesitancy to purchase tickets on dicey days, overcoming objections by guests to commit to purchase. As a sales technique it is quite clever.

SeaWorld recently introduced weather guarantees where by guests can get a make-up day in park should extreme heat or rain interrupt or spoil a guest visit. Now it is expected other chains will soon follow with similar guest friendly policies: https://www.planetattractions.com/news/SeaWorld-‘laying-down-a-blueprint’-with-industry-leading-extreme-heat-policy/2738

Cedar Fair disavows negligence in Top Thrill Dragster incident, seeks dismissal of suit, or failing that, a jury trial: https://www.themeparktribune.com/cedar-fair-denies-negligence-in-response-to-top-thrill-dragster-lawsuit/

https://www.wtol.com/article/news/special-reports/11-investigates-cedar-point/wtol-11-dark-side-cedar-point-national-murrow-award/512-21cfa4f2-a8cc-4fa7-b30e-2d9b4934af71

Here is an expanded version:

The City of Sandusky seeks a fresh new tax levy upon citizens to fund a Recreation Center. Problem is, taxpayers were sold this Recreational opportunity as part of a tax package agreement with Cedar Point in an earlier agreement. Now Sandusky City officials seek to double-dip, pulling the wool over taxpayers eyes, making them responsible for paying once again for the same class of projects. This is on top of the recent sale by Cedar Point of the Sports Center operation to Cal Ripkin Sports group which benefited from the earlier tax package agreement. Cedar Point has done well under the earlier agreement getting new causeway improvements, fire and police upgrades, street improvements connecting to Cedar Point, and a host of other direct benefits from the earlier tax package. It appears taxpayers may be getting soaked for a Recreation Center already funded: https://sanduskyregister.com/news/464111/sanduskys-rec-center-needs-levy/ The earlier agreement, struck in October of 2021, called for the new Amusement and Parking Taxes to fund the Recreation Center (as reported by the Sandusky Register): "Building a new recreation center for city residents, with a focus on youth programming, somewhere in Sandusky; Cedar Point will receive the naming rights." Published along with this story, a table indicated a $700,000.00 per year allocation, for a period of 20 years, to developing and operating the Recreation Center. Please see article, tables, pie-charts, and a review of the $100 million dollar agreement at the link to the Sandusky Register from October 21, 2021 below: https://sanduskyregister.com/news/349690/cedar-point-city-strike-100m-deal/

https://www.ocregister.com/2023/05/17/disneyland-lays-out-theme-park-expansion-plans-for-next-30-years/?utm_email=A41CE4C5C43CE481D40E345403&g2i_eui=DI%2bVyPv5d8wqc5f%2b5%2f9%2fy3v8FGBw2ML3&g2i_source=newsletter&lctg=A41CE4C5C43CE481D40E345403&active=no&utm_source=listrak&utm_medium=email&utm_term=https%3a%2f%2fwww.ocregister.com%2f2023%2f05%2f17%2fdisneyland-lays-out-theme-park-expansion-plans-for-next-30-years%2f&utm_campaign=scng-regional-parklife&utm_content=curated

SNL Weekend Update killed it with a segment roasting DeSantis, Disney, and Six Flags. Enjoy:

Cedar Fair managed the indoor amusement park at the Mall of America for many years. Lessons were learned, and FUN gave up the contract, when it ran out. This may, or may not, give us clues as to the viability of operating indoor amusement parks in malls. Upon Cedar Fair's exit from the MOA the Camp Snoopy branding was removed as CF would not license rights to Peanuts to the new operator.

Universal has discussed plans to open separate gate amusements such as year round Halloween Haunts, such as in Las Vegas, smaller children's themed parks such as recently announced in Texas, and a host of other opportunities both domestically and internationally. This represents a stolen opportunity which was open to operators such as Cedar Fair which has been quite reluctant to open or acquire second gates near parks and resorts they currently operate. An excellent example of FUN failing to extend the brand and operational know-how of attractions management is abundantly clear in Charlotte, North Carolina, where Cedar Fair has overlooked the opportunity of operating the NASCAR Museum in tandem with its Carowinds Park. Such a bolt-on exhibit opportunity would tie into NASCAR theming at Carowinds and extend marketing dollars by allowing for combination ticket sales at little to no additional expense. Ripley's Entertainment as well as Merlin Entertainment has grabbed the opportunity to operate second gates adjacent to popular destinations thus lowering marketing spends and capturing audience and revenues from competing operators both big and small. The move by Universal will capitalize on the markets FUN and others have created. This is, of course, a disappointment to investors who see the opportunity costs of failing to expand the brands to fully capture the revenues available adjacent to big draws such as theme parks. https://www.dailybulletin.com/2023/02/01/universal-studios-to-expand-regional-theme-park-concepts-in-u-s-and-worldwide/