Cedar Fair, Six Flags to merge in search of amusement park recovery

By Savyata Mishra

(Reuters) -Cedar Fair and Six Flags Entertainment agreed on Thursday to merge to spur a post-COVID-19 pandemic recovery that U.S. amusement park operators have been chasing, as consumers have curbed spending due to an uncertain economic outlook.

The tie-up will unite Cedar Fair's properties, which have a license to use Peanuts characters such as Snoopy and Charlie Brown, with Six Flags' amusement and water parks, which license Warner Bros and DC Comics characters, such as Bugs Bunny and Batman.

The combined company would be worth about $8 billion, including debt, with Cedar Fair shareholders owning 51.2% and Six Flags shareholders owning the remainder, the companies said.

They added that the appeal of the combined park portfolio with visitors will boost revenue and cash flow, helping the parks compete with rivals like SeaWorld Entertainment and Disney's theme parks.

"A combined footprint could potentially make a national pass network offering quite compelling," Macquarie analyst Paul Golding said.

Shares of Six Flags ended trading on Thursday up 6.6% at $22.36, above the valuation inferred by the deal of $21.46. Cedar Fair shares closed down 1.4% at $37.

Six Flags will need its shareholders to back the deal in a shareholder vote. It said its biggest shareholder, investment firm H Partners, which holds a 13.6% stake, has committed to vote for the deal.

However, activist hedge fund Land & Buildings Investment Management, a smaller Six Flags shareholder, said in a statement it will not back the deal and was exploring options.

"We believe the right path forward is to monetize the company’s real estate, which alone is likely worth nearly $30 per share based on inquiries we have received from interested third parties," the hedge fund said. It did not respond to a request for comment on the identity of the third parties.

The deal delivers almost no premium to shareholders of either company. Each Six Flags share will be worth 0.58 shares of the combined company, which values Six Flags at close to $2 billion, excluding debt.

The stocks had jumped roughly 6% on Wednesday following a Reuters report that the companies were exploring a potential merger. They have each lost about 10% of their value this year.

The combined company will operate 27 amusement parks, 15 water parks and 9 resort properties across 17 states in the United States, Canada and Mexico.

Cedar Fair will be giving up its status as a master limited partnership (MLPs) as part of the deal. This structure allows it not to be taxed when it pays distributions to shareholders, who are still responsible for paying individuals taxes on their dividends. Many indexes exclude MLPs because of their complex tax structure, and Cedar Fair hopes ditching it will broaden the combined company's appeal with investors.

The merger is expected to close in the first half of 2024, with the newly-created company adopting the name Six Flags.

(Reporting by Savyata Mishra; Editing by Savio D'Souza, Shinjini Ganguli, Nick Zieminski and David Gregorio)