Cedar Fair's planned sale to Apollo Global Management has hit a patch of rough track.
Q Funding III, a Fort Worth, Texas, company that holds 9.8 percent of Cedar Fair’s outstanding units, announced Friday it plans to vote against the merger agreement, arguing the $11.50 per unit offer isn’t good enough.
The agreement must be approved by votes representing two-thirds of Cedar Fair’s outstanding units. If investors don’t fill out the paperwork and vote, their units are counted as a “no” vote.
Continuing coverage of the Cedar Fair story HERE.
An analyst with a private investment firm in New York said it would appear to be “very difficult” for the deal to win approval, given Q’s stance.
Another official, Justin Lumiere, head of the Special Situations/Risk Arbitrage Group at Summit Securities Group, said Q’s statement is likely to be influential.
“When you have the largest shareholder coming out and saying they’re voting against it, it’s easier to get other people. They’re going to join in,” Lumiere said.
Cedar Fair responded with a statement saying it still believes the proposed deal is in the best interest of unitholders.
“This transaction was thoroughly negotiated and includes protections for unitholders, including a go-shop process in which the company has been actively soliciting alternative proposals,” it said.
The go-shop period ends at midnight Monday.
“The offer price of $11.50 in cash per Cedar Fair limited partnership unit represents a 43 percent premium over Cedar Fair’s volume weighted average closing unit price over the 30 days prior to the transaction announcement and the 28 percent premium over the closing unit price on Dec. 15, 2009,” the statement said.
The statement said Q Funding has not contacted Cedar Fair to discuss the deal.
The next-largest unitholder of Cedar Fair units is Neuberger Berman, an asset management company in New York City. According to a proxy statement Cedar Fair filed earlier this month, Neuberger Berman holds 8.8 percent of the units.
“Q Funding III believes other large holders intend to vote against the proposed transaction and urges all holders to do the same,” the company said.
A spokeswoman for Neuberger Berman said the company had no comment.
Q Funding contends Apollo’s $11.50 a unit offer does not represent Cedar Fair’s true value.
The company “does not believe it makes sense to vote for the merger and effectively sell at $11.50 when a holder can sell in the market for a higher price,” it says.
Cedar Fair’s unit price, which rose above $12 a few days ago for the first time since the merger agreement was announced in December, continued to rise Friday. It closed at $12.66, up from a close of $12.21 on Thursday. At one point, the units traded as high as $13.56.
Randy Hunt, branch manager for the Sandusky office of Stifel Nicolaus, noted the price rose even as the stock market as a whole fell. At the close of business, the stock market had dropped for three days in a row.
The Q Funding statement said the company is worried that individual unitholders who are ordinary investors may not realize they aren’t getting a good deal.
“Q Funding III is concerned that the majority of Cedar Fair’s units may be held by retail holders who might be taken advantage of if they mistakenly agree to the $11.50 offer price,” the statement said.
Q Funding is controlled by Texas investment banker Geoffrey Raynor.
Raynor did not respond to a request for an interview.