Thursday, June 13, 2019

Cedar Fair Enters Agreement to Purchase Two Texas Schlitterbahn Water Parks

Some exciting (and surprising!) news broke this morning as Cedar Fair announced that it has reached a definitive agreement to purchase two water parks, one with a full resort attached, from Schlitterbahn.

Cedar Fair will spend about $261 million to become the owner of Schlitterbahn Waterpark and Resort in New Braunfels, Texas and Schlitterbahn Waterpark in Galveston, Texas.  The deal also comes with the ability for Cedar Fair to purchase 40 acres of land in Kansas City, Kansas that Schlitterbahn was operating as a water park for an additional $6 million.

The company's press release notes that Cedar Fair believes they will be able to incorporate the parks into their system of parks easily over the course of two or so years.  They see the Texas market as a developing one and are already proud of the fact that Schlitterbahn New Braunfels has been voted the country's best water park for 21 years, and Schlitterbahn Galveston has been ranked the best indoor water park for a decade.

The deal is expected to close in the 2nd quarter of 2019, which means by the end of this month, and the company will take on new long term debt to pay for it.

The new map of Cedar Fair properties © Cedar Fair
Cedar Fair states that the two Schlitterbahn parks and the resort had attendance of 1.2 million and revenues of $68 million in 2018.  They hope to get the parks to their overall EBITDA margin of 35% within two years, an important factor for Cedar Fair's overall growth goals over the new few seasons.  At the close of the transaction, Schlitterbahn's 221 rooms will combine with Cedar Fair's existing resort operations to total more than 2,000 rooms, 600 RV sites and two marinas.

© Schlitterbahn New Braunfels
The fact that Cedar Fair is purchasing two of Schlitterbahn's water parks is a surprise, but the fact that they were for sale is not.  Schlitterbahn has had some troubles over the past few years, not the least of which was the accident at the Kansas City park, that I won't detail here.  The family-owned company was heavily leveraged on the Kansas development, and now that it has closed it sounds like there was not much of a choice but to sell the remaining parks to pay off that debt before they became bank owned.

Also of note, the Schlitterbahn park and resort in South Padre will remain family owned but will be rebranded to remove the Schlitterbahn name.  A 4th park, Schlitterbahn Corpus Christi, was sold off during a bankruptcy proceeding in 2018 so it ss already technically no longer a part of the chain.  It sounds like both may no longer use the Schlitterbahn name after the 2019 season concludes.

© Schlitterbahn Galveston
Schlitterbahn has a FAQ up already regarding the sale, available here, which has some interesting tidbits.  They state that "it’s important to know that Cedar Fair values Schlitterbahn’s character and brand promise.  They have committed to not only keeping Schlitterbahn awesome but helping us grow!"  While I have not personally been to a Schlitterbahn water park, it's well known that their attraction roster and operating policies are quite different than Cedar Fair's.   For instance, the FAQ notes that guests will still be able to bring their own food and drink into the parks... at least for the 2019 season.

Schlitterbahn's corporate statement on the transaction, which is really saving them from a heap of trouble, paints the future equally bright for the remaining two branded parks:

Cedar Fair is a dynamic, brand-oriented company.  Under Cedar Fair’s leadership, the Schlitterbahn brand will have an opportunity to grow and expand like the early days when the sky was the limit. While it’s a difficult decision, after several challenging years, we believe that our team, communities, guests, and fans are going to enjoy what lies ahead.  We believe Cedar Fair, with their approach to embracing parks that have a unique footprint, will be a phenomenal owner, and with the talented people that are the Schlitterbahn Family, will take Schlitterbahn Waterparks and Resorts to the next level of world-class family entertainment.

To be clear, I'm not saying that the future of these two water parks is not bright, but I definitely think it will be a lot different than it is now.  And maybe that is a good thing, depends on perspective.  It's interesting that Cedar Fair appears to be set on keeping the Schlitterbahn name in use... and these quotes even hint at possibly growing the name in time.  We will see.

As for the Kansas City property, I fully expect Cedar Fair to purchase it, sit on the land for a number of years, remove the water park attractions, then resell it for other development.  The property is only a 26 mile drive from Worlds of Fun, a well established Cedar Fair park.  I simply cannot see them competing with themselves on that front by continuing to develop the former Schlitterbahn park.

Exciting news though, as it's been a long time since Cedar Fair added parks to the chain!  Will be interesting to watch down the road.


Joe said...

Apparently, Cedar Fair doesn't know what states Valleyfair or Knotts Soak City are in, according to that map