Cedar Fair Entertainment and Six Flags Entertainment, two of the world's largest regional amusement park operators, are planning to merge in a deal that is expected to diversify and expand the combined company's North American portfolio and reduce risks related to weather and seasonal volatility as well as save costs.
The proposed merger will create an amusement park powerhouse with an enterprise value of $8 billion and a real estate portfolio that includes 42 parks and nine hotels and resorts across the United States, Canada and Mexico, according to a Thursday statement from the companies.
The deal, which is expected to close during the first half of next year, is expected to reposition the two regional companies into a major player in the amusement park industry that is dominated by the Walt Disney Co., which has a market value of more than $150 billion with major parks such as Disneyland in California and Disney World in Florida in its real estate portfolio.
Like Disney, Universal Destinations and Experiences, the theme park arm of Comcast NBCUniversal, also has big parks and resorts in California and Florida but has begun venturing into the regional theme park business. Universal, which had revenue last year topping $7.5 billion, has plans to build a park in the Dallas area in what would be its first amusement park outside of California and Florida.
Theme park operators, including Disney, SeaWorld Entertainment and Universal, are planning multimillion-dollar investments in hopes they can capitalize on an industrywide pandemic recovery that could be years away. The industry faces lingering challenges that emerged during the pandemic, including rising food and labor costs, along with staffing shortages during peak visitor seasons.
Cost Savings
The new Six Flags brand, operating through a new entity called CopperSteel HoldCo Inc., expects to capture $200 million of annual cost savings from the deal, with $120 million in cuts expected to be realized in the first two years following the merger.
More than half of the cost savings are expected to come from corporate expenses, which could include corporate staff and real estate, but additional details were not provided. Six Flags has its headquarters office in Arlington, Texas, and Cedar Fair is based in Sandusky, Ohio. The combined company is expected to maintain "significant finance and administrative operations" in Ohio but will have its headquarters in Charlotte, North Carolina.
Cedar Fair already has an existing office totaling more than 16,000 square feet in Charlotte at 8701 Red Oak Blvd., according to CoStar data. It is unclear at this time whether they will need additional office space once the companies merge, a Cedar Fair spokesman told CoStar News.
The merger between Cedar Fair and Six Flags is expected to create an enhanced financial profile with strong cash flow generation to accelerate investment in the parks, Richard Zimmerman, president and CEO of Cedar Fair, said in the statement. Upon the merger closing, Zimmerman will lead the combined company under the Six Flags brand as its president and CEO.
The deal also brings access to some popular intellectual property to the table, including Six Flags’ licenses to Warner Bros. and DC Comics and Cedar Fair’s license to Peanuts’ Snoopy and Charlie Brown, according to an investor presentation.
"By combining our operational models and technology platforms, we expect to accelerate our transformation activities and unlock new potential for our parks," Six Flags President and CEO Selim Bassoul, who will become the executive chairman of the combined company's board of directors once the deal closes, said in the statement.
Cedar Fair's 15 parks had 26 million visitors and brought in $1.8 billion in revenue over the past 12 months, while Six Flags' 27 parks had 22 million visitors and $1.4 billion in revenue during that time, according to the presentation.
The combined company's increased free cash flow is expected to offer it greater flexibility to invest in new rides and attractions, as well as enhance food and beverage options at the parks with the ability to bring cross-park initiatives to the portfolio. Each company is expecting to refinance its respective credit facilities ahead of the close of the merger.
The Fine Print
A newly formed board of directors for the combined company will include 12 directors, six from Cedar Fair's existing board and six from Six Flags' existing board.
Brian Witherow, chief financial officer of Cedar Park, is expected to serve as the chief financial officer of the combined company. Six Flags Chief Financial Officer Gary Mick will serve as the chief integration officer of the combined company.
The combined company is expected to operate a portfolio of 27 amusement parks, 15 water parks, nine resorts and hotels, seven campgrounds, two safari attractions, two sports facilities and three marinas, according to the presentation. The combined company also expects to offer expanded park access to season pass holders in a combined loyalty program with additional perks.
The deal could be a win-win for all involved from Cedar Fair to Six Flags to park-goers, said Dennis Speigel, founder and CEO of International Theme Park Services in Cincinnati, who has tracked the amusement park industry for decades but is not involved with the deal.
"This is a win, particularly for Six Flags, who needed to be pulled up, and from the guest standpoint, giving guests a better experience if managed properly," Speigel told CoStar News. "There's not a lot of overlap, and if you work for Disney or Universal, I bet this is something that is making you sit up. They are probably wondering how this will impact them from a local market standpoint and if it could keep people from coming to Florida or Southern California."
The two companies have minimal market overlap of park operations, and the expanded geographic footprint is expected to mitigate the impact of seasonality and reduce earnings volatility, executives said.
Cedar Fair has recently invested in its parks, with those investments expected to accelerate a transformation already underway at Six Flags parks, which could translate into higher demand from park-goers, executives told investors.
In leveraging complementary operating capabilities, the combined company is expected to generate about $80 million of incremental earnings expected within three years of the deal closing.
Cedar Fair shareholders are expected to own about 51.2% of the combined company CopperSteel HoldCo Inc., which will retain the Six Flags brand and trade under FUN on the New York Stock Exchange, with Six Flags shareholders owning roughly 48.8% of the combined entity.
For the Record
Cedar Fair's financial adviser is Perella Weinberg Partners, while Weil, Gotshal & Manges and Squire Patton Boggs are serving as the company's legal counsel. Six Flags has Goldman Sachs & Co. as its financial adviser with Kirkland & Ellis as its legal counsel.