Cedar Fair's buyout on shaky ground

SANDUSKY The ‘no' votes are piling up against the proposed $2.4 billion Cedar Fair
Tom Jackson
Mar 7, 2010

SANDUSKY

The ‘no’ votes are piling up against the proposed $2.4 billion Cedar Fair buyout.

Neuberger Berman, an asset management firm in New York, has announced in an SEC filing that it opposes the proposed merger agreement. Neuberger manages 9.6 percent of Cedar Fair’s outstanding units, and has full discretion on voting for 8.6 percent of those units.

Neuberger’s disclosure follows an announcement from Q Funding, a Fort Worth company controlled by Texas investment banker Geoffrey Raynor, that it intends to vote against the proposed merger and is asking other unitholders to join it in opposing the deal.

 The most recent SEC filing indicates that Raynor now controls voting rights for about 15 percent of Cedar Fair’s units.

Cedar Fair must win approval of the Apollo Global Management deal from votes representing two-thirds of its units, and unitholders who don’t bother to vote will have their units counted as ‘no’ votes.

The amusement park company is expected to mail out a final proxy statement within days giving a deadline on when to vote on the proposed deal.

The merger agreement reached in December by Apollo and Cedar Fair offers unitholders $11.50 per unit. Cedar Fair’s units closed Tuesday at $12.19 per unit.

The announcement that two entities controlling about 23 percent of the votes oppose the deal makes it “very difficult” for the merger to go through, said analyst Justin Lumiere, who runs the Special Situations/Risk Arbitrage Group for Summit Securities Group in New York.

Small investors in Sandusky also have not greeted the merger agreement with open arms, according to local brokers and lawsuits filed at the courthouse.

John Sprau, who lives in Sandusky, said he continues to believe the $11.50 offer is too low.

Stacy Frole, director of investor relations for Cedar Fair, said Tuesday the company will continue to communicate its message that Cedar Fair’s board believes Apollo’s offer was fair.

“We will continue as we go through this process to reach out to investors, including Q Funding and Neuberger Berman,” she said.

Asked if Cedar Fair believes the merger agreement now appears likely to fall through, she said, “We wouldn’t be able to speculate on the outcome of the vote at this point.”

Lumiere said Cedar Fair no doubt has lawyers advising Frole and other company officials about what to say. Once Cedar Fair signed an agreement with Apollo, its spokespersons have little choice but to repeat that the board supports the deal with Apollo, he said.

“They’ll just keep repeating it over and over again,” Lumiere said.

He issued a new report about the proposed merger on Monday. In it, Lumiere applied the latest financial numbers from comparable entertainment companies to arrive at an estimate for what Cedar Fair’s units might really be worth. He arrived at a possible value of $13.19 per unit.

“It could feasibly trade where it is trading right now, without a deal,” he said.