Six Flags and Cedar Fair Merge

[CoastersRZ]

I think that if the merger doesn`t go through, they have to pay Cedar Fair a termination fee.  They also have to get the deal approved by the regulators, which given the scrutiny that current mergers are going through (Re: Kroger and Albertson`s), that is far from a done deal.

I just wish we would stop seeing Cedar Fair cutting budgets/hours/experiences.  Eventually, the park guests will realize how many things are being cut.  It is akin to shrinkflation in the consumer packaged goods arena..  Keeping prices the same, but getting less product for the same price.

[Tr0y]

5 hours ago, silver2005 said:

I'm curious what happens at Six Flags if this doesn't go through.   By some things I've read and heard, they're kind of up s*** creek without a paddle. 

Yep, bankruptcy likely for both Six Flags and Cedar Fair. This merger allows them to kick the can (debt) down the road. 

[BeeastFarmer]

8 hours ago, Tr0y said:

Yep, bankruptcy likely for both Six Flags and Cedar Fair. This merger allows them to kick the can (debt) down the road. 

Hmmm...maybe brighter days could be ahead.  PRKS and or Herschend could be winners.

Or there could be massive losers as private equity swoops in and either dismantles and sells piecemeal or cuts even worse to bost numbers.

Sometimes, though, private equity can be good. Look at what cerebrus has done with Albertsons since like 2006.  Bought back the majority of the company that was divested to a wholesaler and reuinted the company, opened stores, acquired regional chains and then swallowed Safeway. Took the company public again and now a merger attempt with Kroger, and if it fails, Albertsons will get a multi million dollar payout from Kroger. 

[Outdoor Man]

hmmm. A company with a history of financial problems (SIX) and one with storm clouds on the horizon (FUN)..... what could go wrong here?

[DiamondbackFan]

23 hours ago, Shawn Meyer said:

When are the Six Flags unit holders supposed to vote on the merger? Everything is too quiet lately. 

March 12th

https://otp.tools.investis.com/generic/sec/sec-show.aspx?ipage=17224713&Cik=0000701374&Type=PDF

 

[Taylor.B03]

What an interesting paragraph

[BoddaH1994]

On 3/3/2024 at 7:37 PM, silver2005 said:

I'm curious what happens at Six Flags if this doesn't go through.   By some things I've read and heard, they're kind of up s*** creek without a paddle. 

That may be true for both. It would be dependent on how the next few years go.

[jcoop22]

To get the merger to go through they may be required to sell off some of the parks. Kroger and Albertsons have proposed to sell off hundreds of stores to get approval of their merger.

[BeeastFarmer]

8 minutes ago, jcoop22 said:

To get the merger to go through they may be required to sell off some of the parks. Kroger and Albertsons have proposed to sell off hundreds of stores to get approval of their merger.

This is not remotely close. They only have a few markets with overlap, and that is a stretch. But then again, it's a government agency who tend to make no sense. 

[disco2000]

1 hour ago, jcoop22 said:

To get the merger to go through they may be required to sell off some of the parks. Kroger and Albertsons have proposed to sell off hundreds of stores to get approval of their merger.

Grocery store is more of a necessity that needs competition to keep basic food prices lower.  Plus up to this point Kroger has purchased many other grocers without having to sell off any because it was not in overlapping/competing markets.  This one they have a lot of overlap that would eliminate competition.

Amusement parks are a luxury/entertainment industry and still plenty of other competition for your dollar.

[DiamondbackFan]

After the merger, they will probably unload these leased parks:

"During the year ended December 31, 2023, we determined that the carrying value of our leased theme park in Oklahoma City, Oklahoma, Frontier City ("Frontier City") and our leased water park in Oklahoma City, Oklahoma, Hurricane Harbor Oklahoma City ("HHOKC") were not recoverable following multiple years of negative cash flows, as well as projected future cash flows that indicated the respective assets were not recoverable. Based on the analysis performed, we determined that the carrying value of Frontier City and HHOKC exceeded their fair value, resulting in a pre-tax, non-cash loss on impairment of $16.0 million and $7.0 million, respectively. The loss on impairment at Frontier City was allocated proportionally, in the amount of $8.8 million and $7.1 million, to Right-of-use operating leases, net and Property and equipment, net, respectively. The loss on impairment at HHOKC was allocated proportionally, in the amount of $4.3 million and $2.7 million, to Right-of-use operating leases, net and Property and equipment, net, respectively.

During the year ended January 1, 2023, we determined that our leased theme park in Houston, Texas, Hurricane Harbor Splashtown ("Splashtown") was not recoverable following multiple years of negative cash flows, as well as projected future cash flows that indicated the respective assets were not recoverable. Based on the analysis, we determined that the carrying value of Frontier City[sic] exceeded its fair value, resulting in a pre-tax, non-cash loss on impairment of $16.9 million. The loss on impairment was allocated proportionally, in the amount of $15.1 million and $1.8 million, to Right-of-use operating leases, net and Property and equipment, net, respectively."

 

The partnership parks could be sold if the End-of-Term Option is not exercised by Six Flags:

"In January 2027 with respect to the Georgia Partnership and in January 2028 with respect to the Texas Partnership, we will have the option (each the “End-of-Term Option”) to require the redemption of all the limited partnership units we do not then own in the Partnerships. To exercise the End-of-Term Option, we must give the Georgia Partnership notice of its exercise no later than December 31, 2024 and we must give the Texas Partnership notice of its exercise no later than December 31, 2025. If the End-of-Term Option is not exercised, the parties may decide to renew and extend the arrangements relating to the Partnership Parks. Alternatively, if the End-of-Term Option is not exercised, the Partnership Park entities may be sold and the proceeds applied to redeem the outstanding interests in the Georgia Partnership and Texas Partnership, as applicable. If the End-of-Term Option is exercised, the price offered, and required to be accepted by the holders' of the limited units we do not then own would, is based on the agreed-upon value of the partnerships included in the original agreements, multiplied by the change in the Consumer Price Index ("CPI") between the beginning and end of the agreement. The agreements for Georgia Partnership and the Texas Partnership began in 1997 and 1998, respectively. The agreed-upon value for the partnerships, when the agreements were executed, was $250.0 million and $374.8 million for SFOG and SFOT, respectively. As of December 31, 2023, the agreed upon value, as adjusted for CPI, would be $483.5 million and $712.7 million for SFOG and SFOT, respectively. The agreed upon values, if determined as of December 31, 2023, multiplied by the 68.5% and 45.9% of units held by the limited partner for SFOG and SFOT, respectively, represent $330.9 million and $332.6 million that would be required to be paid to the limited partner of SFOG and SFOT, respectively, if the End-of-Term Option were to be exercised. The actual agreed upon value for the End-of-Term Option will be further adjusted by CPI until the end of the each respective agreement. The decision to exercise, or not exercise, the End-of-Term Option for either of SFOT or SFOG will ultimately be made based on numerous factors, including prevailing macro-economic and industry conditions and the cost and availability of financing to fund the purchase."

This information was in the new Six Flags annual report.

https://otp.tools.investis.com/clients/us/sixflags3/SEC/sec-show.aspx?Type=html&FilingId=17326504&CIK=0000701374&Index=10000

[Orion-XL200]

3 hours ago, DiamondbackFan said:

The partnership parks could be sold if the End-of-Term Option is not exercised by Six Flags:

"In January 2027 with respect to the Georgia Partnership and in January 2028 with respect to the Texas Partnership, we will have the option (each the “End-of-Term Option”) to require the redemption of all the limited partnership units we do not then own in the Partnerships. To exercise the End-of-Term Option, we must give the Georgia Partnership notice of its exercise no later than December 31, 2024 and we must give the Texas Partnership notice of its exercise no later than December 31, 2025. If the End-of-Term Option is not exercised, the parties may decide to renew and extend the arrangements relating to the Partnership Parks. Alternatively, if the End-of-Term Option is not exercised, the Partnership Park entities may be sold and the proceeds applied to redeem the outstanding interests in the Georgia Partnership and Texas Partnership, as applicable. If the End-of-Term Option is exercised, the price offered, and required to be accepted by the holders' of the limited units we do not then own would, is based on the agreed-upon value of the partnerships included in the original agreements, multiplied by the change in the Consumer Price Index ("CPI") between the beginning and end of the agreement. The agreements for Georgia Partnership and the Texas Partnership began in 1997 and 1998, respectively. The agreed-upon value for the partnerships, when the agreements were executed, was $250.0 million and $374.8 million for SFOG and SFOT, respectively. As of December 31, 2023, the agreed upon value, as adjusted for CPI, would be $483.5 million and $712.7 million for SFOG and SFOT, respectively. The agreed upon values, if determined as of December 31, 2023, multiplied by the 68.5% and 45.9% of units held by the limited partner for SFOG and SFOT, respectively, represent $330.9 million and $332.6 million that would be required to be paid to the limited partner of SFOG and SFOT, respectively, if the End-of-Term Option were to be exercised. The actual agreed upon value for the End-of-Term Option will be further adjusted by CPI until the end of the each respective agreement. The decision to exercise, or not exercise, the End-of-Term Option for either of SFOT or SFOG will ultimately be made based on numerous factors, including prevailing macro-economic and industry conditions and the cost and availability of financing to fund the purchase."

This information was in the new Six Flags annual report.

https://otp.tools.investis.com/clients/us/sixflags3/SEC/sec-show.aspx?Type=html&FilingId=17326504&CIK=0000701374&Index=10000

Truthfully, IMO, I think if possible, Six should move the rides/assets worth anything to other parks and shut SFOG down. With the continuous issues the park has with security and the like, it seems like the best option. I mean, I don't see the park turning around.  

[Shawn Meyer]

19 hours ago, Orion-XL200 said:

Truthfully, IMO, I think if possible, Six should move the rides/assets worth anything to other parks and shut SFOG down.

Really? It's that bad down there in Georgia?

[disco2000]

51 minutes ago, Shawn Meyer said:

Really? It's that bad down there in Georgia?

This seems to happen a bit down there....

 

[Orion-XL200]

6 hours ago, Shawn Meyer said:

Really? It's that bad down there in Georgia?

Yes....I've only been a few times and I've not necessarily felt unsafe, but I felt something. Not to mention operations are extremely awful. 

[Shawn Meyer]

^ There needs to be a wow emoji here for that comment.

[Kenban]

NOTE: This is copy and pasted, from the annual report, then I tried to clean up the formatting.

Here is a list of the Six Flags parks and how many of them they actually own and which ones are leased, and the foot notes explain when the leases will expire.

Six Flags actually owns a lot less parks than people think.  They fully own only 9 amusement parks, and 3 stand alone water parks, they own portions of 2 more amusement parks, the rest of the chain is just operating leases.  The Six Flags Mexico lease even expires this year, it has been stated by Six Flags they are close to working out a new lease for the park, but nothing is guaranteed.  So on a list of 24 properties, 13 of them have footnotes about leases and partial ownership.

Quote

 

• Six Flags America, Largo, Maryland—523 acres (owned)
• Six Flags Discovery Kingdom, Vallejo, California—151 acres (owned)
• Six Flags Fiesta Texas, San Antonio, Texas—218 acres (owned)
• Six Flags Great Adventure & Safari and Hurricane Harbor, Jackson, New Jersey—2,116 acres (owned)
• Six Flags Great America and Hurricane Harbor Chicago, Gurnee, Illinois—297 acres (owned)
• Six Flags Hurricane Harbor, Arlington, Texas—47 acres (owned)
• Six Flags Hurricane Harbor, Valencia, California—12 acres (owned)
• Six Flags Hurricane Harbor, Oaxtepec, Mexico—67 acres (leasehold interest)(1)
• Six Flags Magic Mountain, Valencia, California—255 acres (owned)
• Six Flags Mexico, Mexico City, Mexico—110 acres (leased and occupied pursuant to a permit agreement)(2)
• Six Flags New England, Agawam, Massachusetts—289 acres (owned)
• Six Flags Over Georgia, Austell, Georgia—291 acres (leasehold interest)(3)
• Six Flags Over Texas, Arlington, Texas—217 acres (leasehold interest)(3)
• Six Flags St. Louis, Eureka, Missouri—316 acres (owned)
• Six Flags White Water Atlanta, Marietta, Georgia—69 acres (owned)(4)
• La Ronde, Montreal, Canada—146 acres (leasehold interest)(5)
• The Great Escape and Lodge, Queensbury, New York—372 acres (owned)
• Six Flags Hurricane Harbor Concord, Concord, California—24 acres (leasehold)(6)
• Six Flags Darien Lake, Corfu, New York—988 acres (leasehold)(7)
• Frontier City, Oklahoma City, Oklahoma—109 acres (leasehold)(7)
• Six Flags Hurricane Harbor Oklahoma City, Oklahoma City, Oklahoma—23 acres (leasehold)(7)
• Six Flags Hurricane Harbor Phoenix, Glendale, Arizona—33 acres (leasehold)(8)
• Six Flags Hurricane Harbor Splashtown, Spring, Texas—46 acres (leasehold)(7)
• Six Flags Hurricane Harbor Rockford, Rockford, IL—43 acres (leasehold) (9)

 

(1) The site is leased from the Mexican Social Security Institute. The lease expires in 2036. The water park opened to the public in 2017.

(2) The permit agreement is with the Federal District of Mexico City. The agreement expires in 2024 and the Company intends to seek renewal.

(3) Lessor is the limited partner of the partnership that owns the park. The SFOG and SFOT leases expire in 2027 and 2028, respectively, at which time we have the option to acquire all of the interests in the respective lessor that we have not previously acquired.

(4) Owned by the Georgia partnership.

(5) The site is leased from the City of Montreal. The lease expires in 2065.

(6) The site is leased from EPR Parks, LLC pursuant to a sublease that expires in 2035 or the earlier expiration of the ground lease. We began operating the water park in 2017.

(7) These sites are leased from EPR Parks, LLC pursuant to a lease that expires in 2037. We began operating these parks in 2018.

(8) This site is leased from EPR Parks, LLC pursuant to a lease that expires in 2033. We began operating the water park in 2018.

(9) This site is leased from the Rockford Park District. The lease expires in 2029. We began operating the water park in 2019.

 

 

[disco2000]

So CF is buying some leases LOL

[DiamondbackFan]

10 hours ago, Kenban said:

The Six Flags Mexico lease even expires this year, it has been stated by Six Flags they are close to working out a new lease for the park, but nothing is guaranteed.

The new annual report footnote says:

"(2)The permit agreement is with the Federal District of Mexico City. The agreement expires in 2034.."

[Kenban]

1 hour ago, DiamondbackFan said:

The new annual report footnote says:

"(2)The permit agreement is with the Federal District of Mexico City. The agreement expires in 2034.."

Which does conflict with other information in the 2023 annual report.  So first let me admit, I copied my chart from the 2022 annual report because that is what the newest report is on https://investors.sixflags.com/financial-information/annual-reports

I did realize after I cleaned it up, you know the SEC filing is out there, its just not the fancy one with graphics.  So I went and looked at that, it appeared nothing had changed and just posted the chart.

Here's the problem with believing the 2034.  This is from page 19 and continuing onto page 20 of the PDF version of the 2023 annual report from https://investors.sixflags.com/sec-filings.

Quote

our lease for our theme park in Mexico expires in 2024. While we are in the final stages of renewing this lease, we cannot guarantee that the lease will be renewed on terms that are acceptable to us or at all.

I personally suspect the lease will be renewed, and maybe it has been and the conflict in dates occurred because it was renewed while the report was being prepared.

[BeeastFarmer]

It will be interesting to hear how SIX shareholders vote today. 

[BoddaH1994]

6 hours ago, BeeastFarmer said:

It will be interesting to hear how SIX shareholders vote today. 

From what I’ve read, they are expected to overwhelmingly vote yes.

[Gordon Bombay]

4 minutes ago, BoddaH1994 said:

From what I’ve read, they are expected to overwhelmingly vote yes.

Correct me if my understanding is wrong, but this seems like more of an upside for SIX shareholders and more of a gamble for the CF side of things?

[Kenban]

When I look at Six Flags I see potential, the chain should have a higher attendance.  It should have a higher revenue, it should be more profitable.  As a chain they are 10 million guests a year below where they were in 2019.  If I was a shareholder of Six Flags, I would jump at the chance of new management.

If I was a Cedar Fair shareholder I would be a lot more conflicted.  It’s possible they are getting Six Flags at a discount due to the poor management.  It’s also possible you end up with people from Six Flags in positions that ruin the company.  Who is in charge and what is going to change becomes more important.

The potential for huge growth and large returns exists, for both sides.  But both have large bills that are coming due, huge upcoming expenses, and frankly I believe many of the Six Flags parks will need a lot of investment.

Synergies between the chains are a real possibility, but the savings they are using to sell this deal seems too high.  My view in the end is this is something Six Flags needs.  That while Cedar Fair would survive without it, they could also see giant growth with it.

[DiamondbackFan]

The Six Flags stockholders approved the merger.

SEC filing

[Gordon Bombay]

Thanks so much, @Kenban.

[DispatchMaster]

14 hours ago, Kenban said:

That while Cedar Fair would survive without it, they could also see giant growth with it.

I am deeply skeptical that this move will result in substantial growth with the existing CF management team. I mean, they've done nothing but diminish and cheapen the product for the last several years, so it seems much more likely that CF will become more like SF than the other way around.

I hope I'm wrong, but I'm not holding my breath.

[matt112986]

16 hours ago, DispatchMaster said:

I am deeply skeptical that this move will result in substantial growth with the existing CF management team. I mean, they've done nothing but diminish and cheapen the product for the last several years, so it seems much more likely that CF will become more like SF than the other way around.

I hope I'm wrong, but I'm not holding my breath.

How ironic that Six Flags wanted to be Cedar Fair and Cedar wanted to be Six.

[IndyGuy4KI]

9 hours ago, matt112986 said:

How ironic that Six Flags wanted to be Cedar Fair and Cedar wanted to be Six.

It sure seems they both should be striving to be more like Herschend. They seem to be the company that has their ducks in a row.

[jzarley]

48 minutes ago, IndyGuy4KI said:

It sure seems they both should be striving to be more like Herschend. They seem to be the company that has their ducks in a row.

Herschend is also not a public company, which really impacts how a board has to approach things like ROIC, revenue and cost structures. Look at the difference between BEC and the standalone (and public) SeaWorld/Busch parks.