Cedar Fair and Six Flags agree to merger of equals to create theme-park operator with 42 parks

By Ciara Linnane

Deal is expected to boost EPS for both companies within a year of closing

Cedar Fair L.P. and Six Flags Entertainment Corp. said Thursday they have agreed to a merger of equals valued at about $8 billion including debt, confirming a report Wednesday by the Wall Street Journal.

Under the terms of the deal, Cedar Fair unitholders will receive one share of common stock in the new combined company for each unit owned, while Six Flags shareholders will get 0.58 shares of common stock in the new entity for each share owned.

Once the deal closes, Cedar Fair unitholders will own about 51.2% of the new entity, and Six Flags shareholders will own the remaining 48.8%.

The deal is expected to close in the first half of 2024.

"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," Cedar Fair CEO Richard Zimmerman said in a joint statement issued by the companies.

The new entity will have a portfolio of 27 amusement parks, 15 water parks and nine resort properties across 17 states in the United States, Canada and Mexico.

Oppenheimer analysts said they view the deal as "highly positive," and noted the new footprint should reduce regional weather exposure.

"We are bullish on the complementary portfolio of assets in North America, Canada, and Mexico, and have long believed that [Six Flags'] stock price did not properly reflect the inherent value of the Six Flags' parks/assets," analysts Ian Zaffino and Isaac Sellhausen wrote in a note to clients.

"Cedar Fair's heavy exposure in the Midwest (e.g., Cedar Point) and California diversify the overall footprint," they wrote.

The companies said the deal is expected to create annual synergies of $200 million. The two companies had combined revenue of $3.4 billion in the 12 months through Sept. 30 after serving 48 million guests. The deal is expected to boost per-share earnings for Cedar Fair unitholders and Six Flags shareholders in the first 12 months after close.

The new company's free cash flow is expected to allow for greater flexibility to invest in upgrades and new rides and attractions, along with improved food and beverage offerings and other in-park and cross-park initiatives, such as technology and guest services.

"The combined company's resources are expected to bestrategically deployed to grow attendance, increase per capita spending,and improve profitability, all while enhancing guests' value andexperience across the park portfolio," said the statement.

The companies are also committed to allocating capital to reward shareholders once the combined company achieves its targeted net-leverage ratio, the statement said.

The new company will operate under the Six Flags name and trade as "FUN" on the New York Stock Exchange.

Zimmerman will run the new company, while Selim Bassoul, the current CEO of Six Flags, will become executive chair of the new board.

Brian Witherow, the current chief financial officer for Cedar Fair, will serve as CFO of the combined company, with Gary Mix, the CFO of Six Flags, taking on the role of chief integration officer.

The new board will be composed of 12 directors, with six coming from each company.

Both companies also reported quarterly earnings early Thursday.

Six Flags posted net income of $11 million, or $1.32 a share, for the quarter to Oct. 1, down from $114 million, or $1.37 a share, in the same period a year earlier. Revenue rose 8%, to $547 million from $505 million.

The FactSet consensus was for EPS of $1.46 and revenue of $539 million.

Cedar Fair posted net income of $215 million, which was down $118 million from a year ago, when it booked a gain on the sale of land at California's Great America. The company did not offer a per-share earnings breakdown in its release.

Revenue fell by $1 million to $842 million, ahead of the $822 million FactSet consensus.

Six Flags' stock (SIX) rose 1.6%, while Cedar Fair's stock (FUN) was down 4.5%.

Cedar Fair's bonds, meanwhile, have seen net selling Thursday, according to data solutions provider BondCliQ Media Services.

Six Flags bonds saw net buying heading into the deal.

The bonds have also seen a nice run-up in price as the deal was expected by the market.

-Ciara Linnane

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11-02-23 1415ET

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