News: Cedar Fair and Six Flags announce equal merger

From the press release:

SANDUSKY, Ohio & ARLINGTON, Texas--(BUSINESS WIRE)-- Cedar Fair (NYSE: FUN) and Six Flags Entertainment Corporation (NYSE: SIX) today announced that they have entered into a definitive merger agreement to combine in a merger of equals transaction. The combined company, with a pro forma enterprise value of approximately $8 billion based on both companies’ debt and equity values as of October 31, 2023, will be a leading amusement park operator in the highly competitive leisure space with an expanded and diversified footprint, a more robust operating model and a strong revenue and cash flow generation profile.

Under the terms of the merger agreement, which has been unanimously approved by the Boards of Directors of both companies, Cedar Fair unitholders will receive one share of common stock in the new combined company for each unit owned, and Six Flags shareholders will receive 0.5800 (the “Six Flags Exchange Ratio”) shares of common stock in the new combined company for each share owned. Following the close of the transaction, Cedar Fair unitholders will own approximately 51.2%, and Six Flags shareholders will own approximately 48.8%, of the combined company’s fully diluted share capital on a pro forma basis. One business day prior to the close of the transaction, Six Flags will declare a special cash dividend composed of: (i) a fixed amount of $1.00 per outstanding Six Flags share, totaling approximately $85 million in the aggregate, plus, (ii) an amount per outstanding Six Flags share equal to (a) the aggregate per unit distributions declared or paid by Cedar Fair to unitholders with a record date following today’s date and prior to the close of the transaction, multiplied by (b) the Six Flags Exchange Ratio, which special dividend will be payable to Six Flags shareholders of record as of one business day prior to the close of the transaction, contingent on the closing of the transaction.

“Our merger with Six Flags will bring together two of North America’s iconic amusement park companies to establish a highly diversified footprint and a more robust operating model to enhance park offerings and performance,” said Richard Zimmerman, President and Chief Executive Officer of Cedar Fair. “Together, we will have an expanded and complementary portfolio of attractive assets and intellectual property to deliver engaging entertainment experiences for guests. The combination also creates an enhanced financial profile with strong cash flow generation to accelerate investments in our parks to delight our guests, driving increased levels of demand and in-park value and spending. I have great respect for the Six Flags team and look forward to joining forces as we embark on this next chapter together.”

“The combination of Six Flags and Cedar Fair will redefine our guests’ amusement park experience as we combine the best of both companies,” added Selim Bassoul, President and Chief Executive Officer of Six Flags. “Six Flags and Cedar Fair share a strong cultural alignment, operating philosophy, and steadfast commitment to providing consumers with thrilling experiences. By combining our operational models and technology platforms, we expect to accelerate our transformation activities and unlock new potential for our parks. We are excited to unite the Cedar Fair and Six Flags teams to capitalize on the tremendous growth opportunities and operational efficiencies of our combined platform for the benefit of our guests, shareholders, employees, and other stakeholders.”

Compelling Strategic and Financial Benefits

A Successful Amusement Park Operator with Complementary Portfolio of Attractive Assets: The combined company will operate a portfolio of 27 amusement parks, 15 water parks and 9 resort properties across 17 states in the U.S., Canada, and Mexico. The company’s complementary portfolio will include some of the most iconic parks in North America with significant brand equity and loyal, recurring guest bases within the highly competitive leisure space. The combined company will also have entertainment partnerships and a portfolio of beloved IP such as Looney Tunes, DC Comics and PEANUTS to develop engaging new attractions enabled by compelling characters, environments, and storytelling.
Diversified Footprint and Guest Experiences: Cedar Fair and Six Flags have minimal market overlap of park operations, and the combined company’s complementary geographic footprint is expected to mitigate the impact of seasonality and reduce earnings volatility through a more balanced presence in year-round operating climates. The portfolio will include diversified experiences for guests including safaris and animal experiences, campgrounds, sports facilities and luxury lounges, enabling the combined company to better meet rising consumer demand for varied and engaging entertainment options.
Enhanced Operating Platform to Improve Guest Experiences: By uniting Cedar Fair and Six Flags’ complementary operating capabilities, the combined company will benefit from a more robust operating platform for improved park offerings and more efficient systemwide performance. The companies expect to leverage Cedar Fair’s recent park investment experience to accelerate the transformation underway across Six Flags’ portfolio. Cedar Fair and Six Flags will seek to create a more engaging and immersive guest experience. The combined company will also offer expanded park access to season pass holders along with an enhanced, combined loyalty program featuring additional perks.
Experienced and Proven Leadership Team: The senior leadership teams of Six Flags and Cedar Fair bring different and complementary skillsets and experience to the combined company, including decades of park operating experience as well as significant expertise integrating businesses and achieving synergy targets.
Significant Cost Savings and Revenue Uplift Opportunity: Following the close of the transaction, Cedar Fair and Six Flags expect the combined company will benefit from the significant value created by total anticipated annual synergies of $200 million. Approximately $120 million of these synergies are expected to be related to identified administrative and operational cost savings, which the companies anticipate realizing within two years following transaction close. The companies also expect to leverage their complementary operating capabilities to deliver additional revenue uplift, generating approximately $80 million of incremental EBITDA that the companies anticipate realizing within three years of transaction close.
Strong Financial Profile: Over the last 12 months, through the third quarter of fiscal 2023, Six Flags and Cedar Fair collectively entertained 48 million guests, and, as a combined company, would generate pro forma $3.4 billion1 in revenue, $1.2 billion1 in Adjusted EBITDA2, and $826 million1,3 of free cash flow4, reflecting run rate cost savings of $120 million and revenue uplift resulting in $80 million of incremental EBITDA. The transaction is expected to be accretive to earnings per share for Cedar Fair unitholders and Six Flags shareholders within the first 12 months following transaction close. The combined company is also expected to have a pro forma leverage ratio of approximately 3.7x net debt to Adjusted EBITDA, inclusive of synergies, with a path to reduce the leverage ratio to approximately 3.0x within two years of transaction close.
Significant Free Cash Flow Generation and Enhanced Financial Flexibility: The combined company’s increased free cash flow will provide it with greater flexibility to invest in new rides and attractions, broader food and beverage selections, additional in-park offerings, and cross-park initiatives, such as consumer technology and enhanced guest services. The combined company’s resources are expected to be strategically deployed to grow attendance, increase per capita spending, and improve profitability, all while enhancing guests’ value and experience across the park portfolio. The combined company is committed to allocating capital to maximize shareholder returns once the company achieves its targeted net leverage ratio.
Leadership, Corporate Governance and Headquarters

The combined company will be led by a proven management team that reflects the strengths and capabilities of both organizations. Upon closing of the transaction, Richard Zimmerman, President and Chief Executive Officer of Cedar Fair, will serve as President and Chief Executive Officer of the combined company and Selim Bassoul, President and Chief Executive Officer of Six Flags, will serve as Executive Chairman of the combined company’s Board of Directors. Brian Witherow, Chief Financial Officer of Cedar Fair, will serve as Chief Financial Officer of the combined company and Gary Mick, CFO of Six Flags, will serve as Chief Integration Officer of the combined company.

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.

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. The combined company will be headquartered in Charlotte, North Carolina, and will maintain significant finance and administrative operations in Sandusky, Ohio.

Approvals and Closing

The merger is expected to close in the first half of 2024, following receipt of Six Flags shareholder approval, regulatory approvals, and satisfaction of customary closing conditions. Approval by Cedar Fair unitholders is not required. Six Flags’ largest shareholder, which owns approximately 13.6% of Six Flags’ shares outstanding, has signed a voting and support agreement to vote in favor of the transaction. The transaction is not expected to trigger any change of control provision under Cedar Fair’s and Six Flags’ respective outstanding Notes. The companies expect to refinance their respective revolving credit facilities, and Six Flags expects to refinance the Six Flags Term Loan, ahead of transaction close.

I wonder if Bugs Bunny will take over Adventure Island?

We still need that thumbs down button….. 👎

Jeff:

Six Flags and Cedar Fair share a strong cultural alignment, operating philosophy, and steadfast commitment to providing consumers with thrilling experiences.

This feels like the biggest lie.

I don't like that cedar point is going to operate under the six flags name now. I'm really confused why they would go with this option. Most people relate six flags with the "Walmart" of theme parks. I feel like that dilutes the brand for cedar Fair and cedar point.

It is interesting that cedar fairs will be the main CEO.

That mega season pass is going to be epic.

Do we know the new name of the merged company? I haven't been able to find it.

Fox 8 cited the WSJ: "According to the Wall Street Journal, the corporate name of the company will be Six Flags, and Cedar Fair’s Richard Zimmerman will be CEO. Six Flags CEO Selim Bassoul will be the executive chairman. "

Jeff:

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.

^

Batman xl 200 and Wonder Woman vengeance.

so much for being a stick in the mud eh?

At any rate, not sure it’s the doom and gloom scenario a lot of social accounts are making it out to be, however I don’t doubt we will start to see varying levels of impact to CF parks over the next few seasons. How aggressive or noticeable those changes will be only time will tell.

I don't see how anyone could see this as a good move for CF, especially relative to how they were positioned during Ouimet's tenure.

I also don't understand why it makes sense given the two companies are relatively equal in value despite SIX having twice as many parks than CF. This does not feel like "a merger of equals". It feels like shortsighted moves by CF put them in a weaker position than they were when SIX attempted this in 2019, and as a result SIX was able to take advantage.

Frog Hopper King:

I don't like that cedar point is going to operate under the six flags name now. I'm really confused why they would go with this option. Most people relate six flags with the "Walmart" of theme parks. I feel like that dilutes the brand for cedar Fair and cedar point.

I don’t think Cedar Fair has much of a brand for the average park goer. I think each park is recognized more as an individual park than as a chain. Cedar Fair awareness was growing a bit with the multi-park passes, as people became more aware of the different parks, but I think the absence of a unifying name hurt them a bit. Six Flags, on the other hand, has a strong brand name. And, although park aficionados may view the brand as the Walmart of theme parks, I think people living in, say, Dallas or Atlanta, don’t see it that way, and they are perfectly happy with having a large amusement park in their area. I obviously could be wrong about this, but I base it on my own feelings as a non-aficionado.

Well so much for the best amusement park in the world....Six Flags will ruin it.....

Frog Hopper King:

Most people relate six flags with the "Walmart" of theme parks.

Amen......

^ More like a Circle K restroom than a Walmart.

Idk, with Cedar Fair owning a controlling 51%, I'd say this may be a good thing moving forward.

“Six Flags and Cedar Fair share a strong cultural alignment, operating philosophy..."

Sounds like Baghdad Bob is back.

DRE420:

Idk, with Cedar Fair owning a controlling 51%, I'd say this may be a good thing moving forward.

Cedar Fair won't own a controlling 51%. It will be one company. CF shareholders will own 51% of the new entity, which isn't enough of a margin for one set of former shareholders to significantly sway the makeup of the board one way or another.

It remains to be seen how this will shake out in terms of which of the former companies' management team and philosophy becomes dominant in the combined company, and the shareholder split won't be a factor. These things usually take some time to play out.

Well, this was absolutely not on my bingo card for 2023/2024.

Is it weird that I'm not too horribly bothered by this, at least not yet? I'd rather wait to see exactly how this all plays out before I fall in with the doom and gloom crowd.