Six Flags Rumored to Have Offered to Buy Cedar Fair

Interesting news popped up today as Reuters reported that confidential sources revealed to them that Six Flags Entertainment has approached Cedar Fair Entertainment with a deal to buy the company.  It would create a massive theme park operator in North America, with more parks under one brand than I can remember at any point in the history of the industry on the continent.

The report says that Six Flags offered a cash and stock combination offer, which sent the shares of Cedar Fair into a massive upward spike that caused the symbol to briefly be halted from trading.  Aside from the Reuters article, the news has not been confirmed by either company.

It wasn't long until followers of the industry were buzzing, and financial analysts as well.  Soon after the news broke it was reported that Wells Fargo saw the deal as a "stretch," noting that Six Flags has no current CEO and they'd have to pay a huge premium to get over tax hurdles resulting from Cedar Fair's limited partnership status.  To that end, Stifel sent out an investor note that the shares of Cedar Fair would possibly have to be bought for as much as $90 (currently trading around $60) which is a rather huge premium.

We're not an investment blog however, so I'll leave it up to the professionals to figure out if a deal would even make sense, but one can be sure there would be a large amount of debt for Six Flags when all was said and done... and also some Cedar Fair unit holders with a big bank account.  And it wouldn't be surprising to see several parks sold off elsewhere as part of the deal.

From the fan community, of which we are a part, the reaction seems to be overwhelmingly negative.  While everyone has a long list of pros and cons for each operator, it seems that no one really wants the two to combine.  Perhaps the thought of Six Flags Cedar Point or Six Flags Knott's Berry Farm is simply too much for those that love the parks.  There is a distinctive difference in the culture of both companies, and many fear how that would mix long term.

Without any more definitive evidence that the deal is even real I'm cautious to speculate on how this would play out, but it would represent an absolutely massive change in the industry in North America.  It would change not only who owns the parks, but also ripple down to ride manufacturers, other suppliers, and of course the park employees.  We will be watching this one closely, for sure.