Cedar Fair: Sale? Re-Finance? What Next?

[IslandAddict]

What?

Addict, much too young to understand tales of the sales.

[jzarley]

"I'm not really a finance person..."

Wow. I can honestly say that's probably the first time I've ever seen the CEO/Chairman of a public company say that (at least, on the record.)

I agree, Interpreter--where was that deep introspection when they were shelling out $1.24B for Paramount Parks? Maybe if he would have made that admission then there would have been a few more questions from the analysts about how they were going to magically increase Paramount Park's margins to cover the crushing debt. (BTW, Paramount Parks, which according to the 8K at the time of the CF acquisition, didn't actually carry any corporate debt on its own balance sheet...)

[Cory Butcher]

Jzarley, I was just about to say nearly exactly what you said...so I will just say "ditto"! lol.

[The Interpreter]

I can't even make stuff this rich up:

...Kinzel, CEO, president and chairman of Cedar Fair, revealed last week that when two Apollo Global Management officials told him Apollo wanted to buy Cedar Fair, Kinzel was sitting at the restaurant eating lunch with Peter Crage, Cedar Fair's chief financial officer.

Asked if he sat apart from other diners so he couldn't be overheard, Kinzel said no.

"I have my usual round table in the corner," he said....

http://www.sanduskyr...ont/1870321.txt

PLEASE tell me I read that wrong. Please tell me this at the time highly confidential possible deal was NOT discussed in public at TGIFridays and that Mr. Kinzel actually said they did not sit in a place where they could be overheard...

But, the article I referenced earlier indicates Apollo people met Mr. Kinzel and Mr. Crage at TGIFridays on October 6: http://www.sanduskyr...ont/1868874.txt :

...The proxy statement Cedar Fair filed two weeks ago said an Apollo official contacted Kinzel in late September. Oct. 6, Apollo told Kinzel it was interested in buying Cedar Fair. The encounter was at TGI Fridays, the restaurant at Cedar Fair's Castaway Bay water park in Sandusky.

"I had my usual round table in the corner," Kinzel said, referring to a table on the west side of the eatery. "We didn't know what they wanted to talk about."

Kinzel said he replied he'd have to take it up with Cedar Fair's board....

(emphasis added to show from earlier article)

And, from that first article in this post, oh, do you believe this? Kinzel's Director of Franchise Operations does, or at least says he does:

...The boss doesn't have a favorite meal he always orders, said Todd Sampson, director of franchise operations for Cedar Fair.

"He orders a variety of things," Samson said.

He said Kinzel's visits don't cause a stir among the staff.

"He's just another customer," Samson said.

http://www.sanduskyr...ont/1870321.txt

(I have watched the parks carefully when I have been in one and known Mr. Kinzel was around. In fact, I can often tell he is around before I even know it, just watching the difference in the staff...to say they are apprehensive, concerned and want to be on their top level best is to be kind. Just another customer? Pish-posh. Kinzel would want Sampson to say this and Sampson knows it. My theory, at least. But just another customer? No way.

Finally, is it Mr. Sampson, as the Sandusky Register first has it, or Samson, as their later references have it? Typical extra care in editing seen at that fine institution. I am sure this article, like most there, will generate some interesting comments at the paper's site.)

[jzarley]

^ Well, in all fairness if you're not really a "finance guy" maybe you don't understand the SEC implications of publicly discussing a proposed acquisition of your public company

If I didn't care so much about what will ultimately happen to the parks, this whole thing would be really entertaining...

[maverick2007]

Wouldn't you at least ask to go into the back or a more private place than the dining room? I mean this is a possible multi-billion $ deal.

[Diamondback FOF]

^ Well, in all fairness if you're not really a "finance guy" maybe you don't understand the SEC implications of publicly discussing a proposed acquisition of your public company

If I didn't care so much about what will ultimately happen to the parks, this whole thing would be really entertaining...

Those SEC implications being...

Wouldn't you at least ask to go into the back or a more private place than the dining room? I mean this is a possible multi-billion $ deal.

Where could you have privacy in TGIFridays? Why would Apollo officials come to TGIF instead of, let's say, Mr. Kinzel's office or even just the headquarters building?

[jzarley]

^ Well, in all fairness if you're not really a "finance guy" maybe you don't understand the SEC implications of publicly discussing a proposed acquisition of your public company

If I didn't care so much about what will ultimately happen to the parks, this whole thing would be really entertaining...

Those SEC implications being...

Well, if you're looking for specifics, 17 CFR Parts 240, 243, and 249 would seem to have some relevance. Not that there would be any purposeful manipulation, but anyone overhearing that information could act on it without the proper disclosures taking place:

http://www.sec.gov/rules/final/33-7881.htm

[Captain Picard]

It seems as if you would give Mr. Kinzel enough rope he will hang himself.

[IBEW_Sparky]

What does he care... he makes a fat stack either way!!

[CedarPointer]

Wouldn't you at least ask to go into the back or a more private place than the dining room? I mean this is a possible multi-billion $ deal.

The music in TGIFridays is so loud nobody could hear them anyway.

[HTCO]

But the Potato Skins would be well worth the trouble.

[Vortex]

I wonder if he was trying to order a Coke Cola that's on the menu but they don't have it.

[Diamondback96]

This made my day. Why would they be in TGI Fridays?

[The Interpreter]

A very good question. October 6, 2009 was a Tuesday. They could have met anywhere from The Breakers to Mr. Kinzel's house to Coasters or Johnny Rockets in the park. Why on earth at TGIFridays at Castaway Bay Waterpark, indeed?

[CedarPointer]

Aren't CF's offices located, like, right next to Breakers?

[The Interpreter]

Yes, but for whatever reason, business people often like to cut deals over food (and drink). Restaurants or houses are prime locations for such meetings, as a rule...not offices. When a restaurant is used, usually a closed one or at least a private room is selected....Heaven knows Mr. Kinzel could have had any restaurant in the (closed) Cedar Point opened for the occasion. Perhaps he did not want them to see the prices?

[Diamondback FOF]

Well, people sometimes celebrate the start of the weekend at TGIFs, so maybe he wanted to celebrate the sale of CF there.

[The Interpreter]

More about the hearing Thursday, including statements attributed to one of the plaintiffs:

...One of the lawsuits filed was on behalf of Pat Herring of Pennsylvania, who owns 561 units and said she wants the sale stopped unless unitholders receive a higher price for their shares.

She said Cedar Fair has been a good company, and she expects the unit price to go up. She said unitholders had no warning of the impending sale.

The lawsuits allege board members did not seek the highest price for unitholders. Spokespersons for the company have said they considered a wide range of options before concluding this deal was in the best interest of unitholders....

http://www.sanduskyr...ont/1871952.txt

Without commenting on the merits (or lack thereof) of this litigation, I must ask no warning of the impending sale? What period is going on now? How many times was the crushing debt mentioned during conference calls? How does she expect the company to be financed if this or another sale does not go through? And in whose interests does she think the board was acting? Various answers are possible for all these questions and more, but still...no warning and she expects the price to go up? I don't see how unless Apollo offers more or there is a sale to someone else. After all, the company CEO, the same one who strongly urged the acquisition of Paramount Parks and has said he is an operations guy, not a finance guy, will remain in charge unless there is a sale, and possibly even if there is.

Under the total quality management theory, the definition of insanity is doing the same thing over and over again and expecting a different result. No sale? Same CEO, presumably. Same debt, presumably. Same economy, or only marginally better, presumably. Same debt covenants, presumably. If there is no sale, why would you expect the unit price to go up?

I submit these plaintiffs do not actually think Cedar Fair has a bright and shining future absent an acquisition...but only want to be paid more than is proposed. Not saying there isn't a case for that (or is).

[jzarley]

^ yeah, that was some pretty clear writing on the wall to miss. (That litigant must not read this site or any other enthusiast forum )

It's been pretty clear for a while that CF's situation had three potential outcomes:

1) An acquisition by a party who could absorb the debt

2) Bankruptcy

3) CF's business (and the credit markets) improves so significantly (and so quickly) that they're able to meet all the covenants, and pay down the the debt.

Since #3 was fairly unlikely, that only left two realistic outcomes. Of those, an acquisition was definitely the better scenario.

If I were a betting man, my money would be on Apollo coming back with a revised bid of $12-12.25 (to reflect the interest of any third parties, as well as better reflect the current market price...) I guess there's still a chance of a third party offer coming in that's even better (Blackstone?), but at this point their exposure in the theme park business is pretty heavy the way it is.

[bkroz]

Not to mention, in my humble opinion, Blackstone is dealing with high-income, high-popularity parks that are world-renowned. And while the former-Paramount Parks were debt-free (right?) at the time of their acquisition, the fact of the matter is, I can't see Blackstone owning SeaWorld and some of Cedar Fair's lesser performers... Busch Gardens Europe and Valleyfair having the same owner? Or SeaWorld and Great America? It's just a bit far-fetched to me, but who knows!

Now, that being said, if/when the parks are sold off individually, I think it would be very realistic to say Blackstone may snatch up some of the more highly themed and lucrative parks, say the King parks, Knotts, Carowinds, Canada's Wonderland, maybe? I think Kings Island / Dominion could fit nicely in the well-themed, but still thrill-laden former Busch parks family. But things like Great America and Valleyfair and Dorney? While they're fantastic parks, they don't exactly exude an aura of "I'm fit to be SeaWorld's sister park." Not as they are now, anyway.

I think that, while it's the same sort of thing, the parks would fit well under the Merlin banner. Much like Alton & Thorpe & World of Adventures, the parks are lightly but efficiently themed and contain many thrill rides.

And I have no idea about legal issues and what's possible and what's not, but I could certainly imagine seeing in the news that the board of directors of Cedar Fair (headed by Kinzel) have elected to continue running Cedar Point independantly as the other parks are sold. I have no idea if that's even possible, but it just strikes me as something that would happen long before it gets sold to Six Flags, Merlin, etc.

Just my thoughts!

[jzarley]

^ You make a good point about the quality differences between the parks if everything were to somehow fall into this hypothetical Blackstone portfolio. Let's face it...both are good parks, but there's a very big difference between Sea World and Michigan's Adventure. IMHO, that was one of the things that lead to the downfall of Six Flags. The previous SF management slapped the Six Flags brand on everything, so that it became very difficult for the park-going public to know exactly what a "Six Flags park" really was, and there were some parks that couldn't come close to offering the guest experience of a "real" SF park (the "real" SF parks being Texas, Georgia, Great Adventure, etc.)

It will be interesting to see how Blackstone approaches owning both the BEC and Merlin chains. Will they be kept separate, or will they be blended together? If past behavior is any indication, it wouldn't surprise me if they keep the chains separate, but utilize synergies where they make sense (like in supply chain, etc.)

Blackstone is now one of the largest hotel operators (if not THE largest) in the world, controlling something like 15 major brands. I still have a lot of former colleagues who work for chains now owned by Blackstone, and for the most part they've kept the chains (e.g., La Quinta and Hilton) as separate entities. While they tend to find synergies on some back-of-the-house items (i.e., central reservations outsourcing, etc.), most customers would still approach all of Blackstone's hotel interests as separate brands. (Of course, that also makes it a lot easier to sell off individual chains later...)

Personally, I don't think the CF parks will ultimately end up with Blackstone (well, in this round anyway), but it certainly makes for some interesting conversations and speculation

[bkroz]

Plus, imagine The Crypt retrofitted with laser guns and re-themed to "Tomb Blaster!" Hahhaa. The world's first interactive top spin? Sounds like a Merlin-thing to me!

[Beast1979]

Sounds good to me, it's tame enough you'd not only be able to hold a gun but you could also hit the targets on the wall!

50 points if it goes through the Goddesses' head!

[The Interpreter]

Knowing Cedar Fair's penchant for odd ride names, if Mr. Kinzel had any influence in the new company, they'd doubtless call that ride, as changed:

The Boom Boom Room!

[The Interpreter]

With the go shop period underway, and ending January 25, and with a $11.50 offer from Apollo on the table, FUN closed today at $12.19, up 25 cents, or 2.09 percent. I will leave it to others to speculate why...

[KIfan1980]

With the go shop period underway, and ending January 25, and with a $11.50 offer from Apollo on the table, FUN closed today at $12.19, up 25 cents, or 2.09 percent. I will leave it to others to speculate why...

I've got to admit that this baffles me. Do that many people really believe a better offer (from Apollo or another company) is coming despite the fact that there has been no news, leaks, rumors (or sightings at TGIF)? Do investors really believe that the unit holders will vote down the acquisition? Did the fools at a website Terpy linked to earlier buy based upon the high dividend recommendation?

As long as it's been above $11.50 now, you've got to believe that their is other interest - otherwise, why wouldn't more people be cashing out for more than the Apollo offer - but if that's the case and its so well known by the investors, why not a story, rumor, or anything.

[The Interpreter]

Add to that the vague references to requests for at least short term covenant relief/extended financing mentioned ONLY in the Richmond, Virginia and Toledo, Ohio newspapers...seemingly without a peep elsewhere...

[Beast1979]

I say if I'm a shareholder I go with the Apollo buyout. Cedar Fair is lucky they found someone even interested in rescuing them, let alone for $11 a share. The other options would include what? Chapter 11? Chapter 7? Desprate hope that there's someone else out there who wants Cedar Fair? This looks very good for us watching financially and enthusiast-wise, I've got to wonder why these people are filing suit against them, of all things.

[The Interpreter]

Jackson, why would you wait to sell to Apollo for $11.50 a unit when you could have sold TODAY for $12.19 a unit? Why would you willingly lose 69 cents a unit? Then again, maybe Apollo will raise its offer. Maybe Cedar Fair will find someone else to pay them more by the Monday deadline (the January 25 end of the "go shop" period).

Or, if you wait, Jackson, to sell at $11.50, the holders of 2/3 of the units may not vote for the sale, in which case there will be no sale, and you would then have to take your chances on the future...and a possible bankruptcy, as you yourself said...