Is Cedar Fair entertaining idea of selling?

SANDUSKY Cedar Fair Entertainment Co. is reaching out to private equity firms that may be interested
Janet
May 24, 2010

SANDUSKY

Cedar Fair Entertainment Co. is reaching out to private equity firms that may be interested in a buyout, according to a report Monday by the New York Post.

Citing two unidentified sources, the Post reported that Cedar Fair has contacted New York-based Bear Stearns Co. Inc. to conduct a "small, highly targeted auction" for the company.

But some industry analysts believe otherwise.

"I think the leverage firm found them," said Ned Hill, vice president of economic development at Cleveland State University. "There is a lot of money in the leveraged buyout pool right now."

The New York newspaper reported that the investment banking firm has contacted several potential buyers including Apollo Management, Thomas H. Lee Partners and an unidentified European suitor.

Scott Hamann, an equity research and senior leisure analyst for Keybank Capital Markets in Cleveland, said he believes private equity firms are just one of several options the company has contemplated, but he is skeptical about the potential transaction.

"I'm not sold on the fact they're going to do this," Hamann said. "I think they are just looking at a whole bunch of options to see what would be the best thing for them to do."

Hamann said taking a company private is an easy way to cut costs. Private companies don't have shareholders, which would mean the company would save on paying dividends every year, investing that money elsewhere.

"That's why it's attractive for some people," Hamann said.

Cedar Fair nearly doubled in size after it acquired five Paramount Parks -- including Kings Island -- from CBS Corp. last summer for $1.24 billion. The company now owns and operates 12 amusement parks, five water parks, an indoor waterpark and four hotel facilities across the nation and Canada. Cedar Fair also owns Star Trek: The Experience, an interactive adventure located in Las Vegas.

But with the acquisition also came debt. Acquiring the parks last year left Cedar Fair with almost $2 billion in debt.

The Post reported that the company's price tag could be about $3.3 billion.

"We have a policy not to comment on rumors or speculation," said Stacy Frole, director of investor relations for Cedar Fair about the possible sale of the company.

Cedar Fair Chief Operating Officer Jack Falfas and CEO and President Dick Kinzel were out of town Tuesday and unavailable for comment.

Hill said he believes two scenarios could play out with Cedar Fair.

"A private equity firm invests more in (Cedar Point) to increase the effective season ... building on what Cedar Fair has already been doing with the waterparks," Hill speculated. "The other alternative is taking Cedar Fair's expertise to grow the business by getting seasonality out of it or expanding it into warmer areas and faster-growing areas that would have longer seasons."

Hamann said even if something is in the works, he doesn't expect the company to do anything soon.

"I think the company is going to focus on the big, summer operating season for the next couple of months," he said. "I think they are going to focus on running the parks and trying to generate as much revenue as possible. After that, they might pick this up and take a look at it."

Hamann, who has spoken to Kinzel in the past, said he knows that Kinzel is proud of what the company has done for its shareholders for the last 30 years.

"He's proud people are living off this distribution," Hamann said. "I don't think (Cedar Fair is) in dire straits. I think they're looking at different angles."