Digesting the Cedar Fair and Six Flags Merger

© Six Flags

I had to really let this one sink in for a while before covering it here - but as I'm sure you've all heard by now Cedar Fair and Six Flags have reached an agreement to merge into one company.  The new company will trade on the stock market under the ticker FUN but will be called Six Flags Entertainment Corporation.  Essentially that means that the company we all love named Cedar Fair will cease to exist when the deal closes in the first half of 2024.

Technically neither company is buying the other in the merger, and shareholders of each company will receive shares of the new Six Flags according to set multipliers announced already.  The new company will have an enterprise value of around $8 billion and they will own and operate "27 amusement parks, 15 water parks and 9 resort properties across 17 states in the U.S., Canada, and Mexico."  A big plus for the merger is that the company will be less exposed to bad weather in one specific part of the country as they'll have parks much more spread out.

© Six Flags

The new Six Flags also expects to quickly achieve around $200 million in "annual synergies" - meaning cost savings to the bottom line.  From purchasing power to being able to remove duplicate jobs, the new company can push more toward profits by leveraging their larger enterprise.  They think they can turn that into as much as $80 million in EBITDA within three years.

© Six Flags

The new company will have a 12 person board with six members coming from each company.  The current Cedar Fair CEO, Richard Zimmerman, will service as the new Six Flags' CEO.  Six Flags current CEO, Selim Bassout will become the Executive Chairman of the Board of Directors.  Cedar Fair's CFO will keep the position in the new Six Flags and current Six Flags' CFO will become the Chief Integration Officer.  The new company's headquarters will stay in North Carolina where Cedar Fair's currently is.

Based of where both companies are currently, the new Six Flags will have around $3.4 billion in revenue, $1.2 billion in EBIDTA and entertain around 48 million people per year.  In the end Cedar Fair unit (stock) holders will own 51% of the new company and Six Flags stock holders 49%.

© Six Flags

On a call regarding the merger leaders of both companies were quick to point out that the plan will allow for a larger amount of free cash flow that they can use to pay down debt.  They also say that the larger cash flow will be used for investing in the parks.  Exactly how that will work, at least to me, will depend on their performance as paying down debt to support the new company's stock price will typically come first.  Since the new company will still be publicly traded the burden of making decisions to support the stockholders will always be #1 - not what the coolest coaster is to build.

© Six Flags

To me the leadership set up is telling (along with other facts sprinkled so far in this story).  I know this is a merger of the companies but to me personally it feels like Cedar Fair is adding Six Flags to their company.  From the CEO placement to headquarter location, Cedar Fair seems to be running things here.  And from a purely personal opinion that makes sense as Six Flags' leadership feels underwhelming when compared to Cedar Fair's.  There are definitely pluses from both companies to explore but Cedar Fair even notes that they think they can vastly improve Six Flags' parks in-park spending, mostly through food and beverage.

However no one can ignore that Six Flags is a clear national brand, perhaps a bit global even, and Cedar Fair is not at all, their parks names' are their real brand.  This will also gives all Cedar Fair parks access to Looney Tunes and D.C. Comics, which when done right could be cool, but if smothered into the parks like Six Flags does it could be pretty not cool.  Cedar Fair in the past few years entered a new 'make it themed' era and I pray it doesn't stop with this merger.

© Six Flags

When the deal was announced there was a lot of fear about park areas between the two companies that overlap, and rightfully so.  Northern and Southern California, Virginia, Pennsylvania and New Jersey for example.  Six Flags and Cedar Fair leaders were asked about this and they do not seem to view these as redundancies, instead they see an opportunity to grow season passes that would allow visitors to go to both parks with one pass - creating an even bigger base of visits, and in turn money.

© Six Flags

But, when pushed again about the value of divesting "lower return lower quality" parks Cedar Fair's CEO said "As we look at the portfolio, I said this before, there were these are really irreplaceable assets. We’ve always struggled with, how do you grow if you shrink your portfolio. But I do think as we look at the combined portfolio, we’re going to evaluate a whole range of ways to unlock and maximize the
values. I’m most excited about focusing on all 42 to see how we optimize and, and create the ability to generate as much revenue uplift and cash flow generation as possible.
 

But over time, as stewards of capital in the market, I think our Board will have the opportunity to evaluate what really drives and maximize shareholder returns once we get to that targeted leverage ratio, and we’re looking forward."

So, the new company will most certainly not be afraid of selling (or I shudder to think of other options) parks that are not meeting their standards or present other opportunities that are too good to pass up.  Recall that Cedar Fair sold the land under California's Great America well before this merger, knowing full well it meant the eventual end of the park.  The comment does acknowledge that these are "irreplaceable assets" but at the same time makes it clear that their job is to "maximize shareholder returns."  So while they do not appear to have an immediate plan to divest any parks, it is by no means off the table.

© NewsPlusNotes

In order for the deal to happen there are several items that have to take place.  Largest is an affirming majority vote from the Six Flags Entertainment stockholders.  The new company also needs antitrust approval, though that doesn't seem a real issue at all in their minds.  Also, the deal can be killed for a number of reasons including if Six Flags board of directors changes its recommendation that stockholders approve the deal or doesn't make the recommendation at all, then a "Cedar Fair Triggering Event" takes place and then Six Flags owes Cedar Fair a cool $63.2 million.  The deal itself is about 140 pages long, and I personally can't get through it, but you can at this link if you like.

The fact that if the deal falls through Six Flags owes Cedar Fair that much money is also telling to me about who holds the power in the deal.  That gives me some comfort, but as we've seen in countless other large mergers in other industries, there's always some good and often plenty of bad.  Buckle up for this one, indeed.

New Kids Section Opening at Schlitterbahn New Braunfels in 2024

© Schlitterbahn

Since Cedar Fair purchased both Schlitterbahn New Braunfels and Galveston in 2019 we've seen the company focus on getting the parks up to their standards and making a lot of cosmetic and infrastructure improvements.  Meaning, no new rides and attractions have really shown up under Cedar Fair ownership.  At least until now, and while it is not the biggest announcement it is certainly an interesting one and a step in the right direction in the new-attraction department.

 

© Schlitterbahn

Schlitterbahn New Braunfels, the original park, has announced that a new kids area named Schatze's Storybrook Park will open in 2024.  For those unaware (i.e. me until a moment ago), Schatze is Schlitterbahn's dog mascot.  So that makes more sense now.  The park says that the new area will let us see how "Texas’s favorite short-legged hound has reimagined everyone’s favorite fairy tales into puppy-themed fairy “tails” gushing with splish-splash fun."  Essentially it looks like a total bulldozing and redo most of the kids area seen in the aerial above.

 

© Schlitterbahn

The overall expansion area has small sections to it, here is Schatze's Paw'nd, which features Schatze's Bow Wow Blaster, the first ever water coaster designed for kids.  There are also three small water slides "Three Little Pugs" - each slide is named Noodle, Comet and Curly.  The section also has a small shallow "paw'nd" for toddlers to splash in.

© Schlitterbahn

This section is named Fur-Bidden Forest, with the main feature being a water fun house that has a giant tipping bucket on the top of it.  The area will feature "water-gushing mushrooms, tree-shaped water slides, and areas to play, crawl, climb and get soaked." The fairy tale theme continues here as "Prince Hopsalot from Schatze’s retold story, The Paw Prints and the Frog, sits at the forest edge."

 

© Schlitterbahn

Finally we have Fairy Tale Trail, a very quiet and unassuming area for kids to relax and toddlers to play in small fountains and appropriately sized slides.  Kids can "tiptoe through the trees in Little Red Riding Hound’s forest, make a daring escape from Houndsel and Petzel’s dog treat house, feel like royalty at Rapawnzel’s enchanted castle, and hop around water geysers at Pawed Piper’s Pipes."  

 

The development is interesting because when the Schlitterbahn parks started to build new attractions under Cedar Fair I expected large, soaring slides that would break records.  Instead, we're getting a themed kids' area with a rather intricate backstory.  I like it!  I'm a fan of the chain of parks diving a bit deeper on experiences and theme, so I'm all for it!

Cedar Fair Ends Relationship with Camp Cedar Near Kings Island

© Camp Cedar

Cedar Fair has ended their relationship with the luxury cottage and campground near Kings Island, now named Camp Cedar, after only a couple years.  The company never owned the new development, instead they had a management contract in place to operate the facility.  The property was previously known as Kings Island Camp Cedar, and was announced in late 2020 and opened to guests in 2021.  It is located less than a mile from Kings Island.

According to this news article the new management company for Camp Cedar is named Advanced Outdoor Solutions, which has been in business for two decades and specializes in outdoor hospitality.  The new operators are planning on making improvements to Camp Cedar immediately, including making it pet friendly, adding RV rentals and hosting plenty of family-friendly activates on site.  They will still offer shuttles to Kings Island and honor a season pass holder discount.

Looking back, Camp Cedar and the deal to run it was never really mentioned much at all by Cedar Fair in the two years they managed it.  It's curious for the relationship to end so suddenly, but then again Cedar Fair also quietly ended their management contract for Gilroy Gardens last year as well.  Perhaps that's just not a business model they are interested in.  On the other hand, maybe Cedar Fair just stepped in to run the development to help get it open, as it has value as an obvious feeder for the park, while never planning to run it long term. 

Cedar Fair Announces Frist Phase of ESports Development at CP Sports Center

© Cedar Fair

The first phase of the planned Esports arena has been announced to open this coming May at the Cedar Point Sports Center in Sandusky, near Cedar Point.  The initial phase is greatly scaled back from the original plans that were released in 2021, but also note that they say this is just a first phase.  Perhaps they need to test the waters to see if interest is there for the larger project first.

The development opening in May will consist of a 1,000 square foot space in the existing building, not any type of actual physical expansion of the center.  Known as Cedar Point Esports, it will feature 32 "competative gaming setups against the backdrop of multimedia video displays that have the flexibility to connect for larger events."  The equipment will be "top-tier" professional and will allow for "practice, competition and extra-curricular play."  The plan is to create Northern Ohio's "premier immersive gaming experience for leagues, camps and clinics."

“Cedar Fair’s long-term strategy is focused on delivering immersive entertainment experiences that differentiate our parks and create an environment where guests want to come back again and again,” said Richard A. Zimmerman, president and chief executive officer. 

 

Cedar Fair is partnering with North Coast Entertainment to develop and run the facility as an amenity for the Cedar Point Sports Center.  It will be open to visitors and the public as well.  Cedar Fair does note that this first phase will "serve as the gateway from the existing Cedar Point Sports Center to the upcoming larger Phase II expansion.  Future plans for the development are likely to include food, beverage and a larger competitive space."

Carowinds and Kings Dominion to Operate Year Round Starting in 2023

© Carowinds

Both Carowinds and Kings Dominion have announced that starting in 2023 they will be open year round, continuing operations during the winter months of January, February and March.  This is a big move for owner Cedar Fair, as they try to create more revenue opportunities for the company on a 365 day calendar, similar to how Knott's Berry Farm already functions.

Carowinds traditionally closed after their WinterFest celebration at the start of the new year.  Moving forward, however, guests will be able to visit the park on weekends and partake in even more fun and special events during the winter months.  The park does warn that weather events, maintenance on rides and other factors will limit the amount of operations and food and retails locations open during the added operating days.

© Kings Dominion

Kings Dominion, which is further North than Carowinds, will also follow the same schedule and stay open on weekends in January, February and March in 2023.  While weather may be more of a factor for this park than Carowinds, they're giving it a try and are excited to welcome guests each month of 2023.

“Kings Dominion will be the cure for cabin fever in 2023,” said Bridgette Bywater, vice president and general manager. “We’ve always wanted find a way to extend our season to all 12 months, and now families and season passholders won’t have to wait until the spring for their favorite rides or their first taste of funnel cake.” 

This is an exciting move for fans of both parks, who no longer have an "off season" and can ride year round!  Hopefully it is a success for the parks.

Cedar Fair Sells California's Great America Land + Plans to Close Park

© California's Great America

Last week Cedar Fair announced that they have sold the land that California's Great America sits on and plans to "wind-down" the operation of the park and close it permanently.  As part of the sale of the land the company will immediately lease back the operation of the park.  The land was sold to Prologis Inc., a company who "acquires, develops and maintains the largest collection of high-quality logistics real estate in the world" - basically they develop and own warehouse operations.

The land was sold for $310 million, and if you recall Cedar Fair purchased the land under California's Great America in 2019 for $150 million.  Ironically, at that time Cedar Fair's CEO commented that the purchase "underscores Cedar Fair’s long-term commitment to California’s Great America."  That commitment appears to have lasted until the land more than doubled in value.

But, to be fair, the pandemic got in the way.  Cedar Fair's press release on the sale points out that the money from the land sale will be used for "reducing debt to achieve its $2 billion target, investing in high-return projects within its portfolio such as upgrading resort properties, and reinstating a sustainable unitholder distribution."  I think the restart of the distribution is key here, as the company has long sold itself to investors as a solid and reliable dividend payer - and obviously the dividend was stopped during the pandemic.  Slapping a bunch of cash against the debt they took on to survive the pandemic will allow them to restart the dividend in just a couple months from now.

 

© California's Great America

Cedar Fair put some additional details in their filing with the SEC about the sale.  The lease they have runs for six years, and has an optional 5 year extension.  So the maximum the park can operate is 11 more years.  However, Prologis can notify Cedar Fair they want the park closed with a 2 year notice.  Cedar Fair will pay $12.2 million in rent each year to operate the park, with the rent going up 2.5% each year.  Without knowing each parties' exact intentions it is still hard to believe that the park will operate beyond the initial 6 year lease, and potentially will cease operations well before that.

 

California's Great America was poised for a large expansion period that started back in 2017 when Cedar Fair started talking with local officials about adding large rides and making a big part of the park a shopping and dining area with no gates.  Things did get a bit suspect over the years as none of these big plans ever materialized, aside from the waterpark expansion, which in hindsight makes sense. We actually wrote a post back in 2016 that referenced a story of another developer wanting to raze the park for housing, so uncertainty has always been floating above the park.  Going back further, in 2011 Cedar Fair actually agreed to sell the park only to have the sale fall through - though that was very much tied to their unhappiness with the development of the giant stadium next door.

 

The sale of the park is only the land, Cedar Fair retains all rides and structures, so there is a possibility for some of the attractions to be relocated or sold to other operators.

Heard On... Cedar Fair's Q1 2022 Earnings Call

© Cedar Fair

Cedar Fair announced record results for the first quarter of 2022, with strong indicators of a busy season ahead.  It seems that theme parks are still experiencing a post-pandemic rush, which is a great thing for us fans.  Cedar Fair had their usual conference call after the earnings came out, here are some notes from that:

• The January through April period had record revenues of $193 million, a $48 million increase over the first quarter of 2019 (the last really comparable quarter).  For the first three months revenues were $99 million, per capita spending was $58.86, and out of park revenues were $16 million.  Operating loss was $84 million, up from a loss of $92 million last year.  EBITDA was a loss of $68 million, up $15 million from last year.  Attendance was 1.45 million, up 24% from 2019.

•  At quarter close deferred revenue was at $234 million, up $36 million from the end of the calendar year.  Specifically, season passes were up $59 million over 2019 at the end of April, and "add on" features to passes were up $17 million.  Resort bookings were also ahead of 2019 levels, and bookings for the Cedar Point Sports Center are "very strong."

•  This year out of park revenues will be bolstered by the reopening of both Castaway Bay and Sawmill Creek resorts, which were closed last year.

 

© Cedar Fair

•  The labor market so far this year is somewhat better than last year, though hourly rates are still at a history record high.  They've introduced a "wage scale based on seniority, responsibility and job specialization" and are participating in the J-1 Visa Exchange program as much as they can.  This year Cedar Fair expects 2,400 total operating days across all parks and operating hours of 23,000, which is up 60% from 2021.  In 2021 the average seasonal labor rate was just over $17 per hour, so far this year it's 2-3% above that.

• With a big focus (and big spending to match) on culinary operations at the park, Cedar Fair reports that through the first 4 months of the year they had a F&B transaction count increase of 6%, which equates to 150,000 additional transactions, over 2019.  The average value of each transaction also increased by 25%.

•  The company is spending around $200 - $215 million on capital expenditures this year, $40 million of that was for Castaway Bay and Sawmill Creek.  Another $25 million will be for a full renovation of the Knott's Berry Farm hotel over the next year.  $60 million is being used to upgrade in-park culinary offerings and food delivery systems.  The rest (around $75 million to $90 million) is for "traditional investments in new rides, attractions and events designed to drive visitation, as well as technology and park infrastructure enhancements aimed at improving the overall guest experience." 

 

•  The CEO commented on capital expenditures and noted that he is excited about plans for 2023 and 2024.  He explained they're contracted on rides for those years and you always have to be contracted 24 months out for a new ride, and that manufacturer slots are filling up very fast as a sign of the strong industry recovery.

 

© Cedar Fair

•  The company aims to reduce long term debit to less than $2 billion, and last December paid off 50% of the loans they had to take out during the pandemic.  At the end of the first quarter total debt was $2.6 billion.  They also intend to reinstate the quarterly dividend by the 3rd quarter of this year, or sooner. 

• It sounds like the company is done giving out financial guidance.  Instead they will give updated trends at earnings releases that go past the quarter end, and trends after Memorial Day, July 4th and Labor Day weekends.  So our next updated form the company will just be a couple weeks away or less.

Cedar Fair and Family Entertainment Group Expand Partnership in 2022

© Cedar Fair

Cedar Fair and Family Entertainment Group (FEG) are expanding their partnership in 2022, with FEG taking on operating many of the chain's arcades, called game rooms by the company.  According to a press release from FEG, the partnership started back in 2004 when it began operating the game room at Castaway Bay.  In 2020 the company took over game room operations at Cedar Point and the Breakers hotel, which led to record performance in 2021.

© Family Entertainment Group

In 2022 FEG will operate the game rooms at Kings Island, Carowinds, Dorney Park, Michigan's Adventure and Worlds of Fun.  The rooms will be staffed by FEG and they plan to make major cosmetic changes and remodeling of the rooms at  the parks.  Together they will feature over "400 top earning games, merchandise and all new redemption areas."

 

Family Entertainment Group is already well positioned in the game industry, operating locations at many major indoor water park resorts, hotels, casinos and more.  They also operate their own owned locations such as In The Game and Bonkers, with locations around the country.  If that wasn't enough to keep them busy they also do game consulting, food operations, marketing and more.

Heard On... Cedar Fair's Q4 2021 Conference Call

© Cedar Fair

Cedar Fair recently held their Q4 and year end 2021 conference call after their earnings report came out.  You can check out the company's full press release at this link.  As in the past the conference call is used to go over their figures, but there are always some other tidbits in there too - some notes from which are below.

•  On a high level view of financials, revenues in 2021 were $1.34 billion, compared to $1.47 billion in 2019 - the last pre-pandemic year.  Attendance was 19.5 million guests, down 8.4 million from 2019.  Out of park revenues of $168 million was comparable to 2019.  Per capita spending hit a new record of $62.03, 28% higher than 2019.  Full year EBITDA was $325 million in 2021, compared to $505 million in 2019.  Net income, however, in 2021 was a loss of $49 million compared to a gain of $172 million in 2019.

•  Digging into attendance a bit more, in 2019 the parks had a total of 2,224 operating days, in 2021 they did 1,765.  Overall totals in 2021 were about 70% of 2019 attendance, but on a day to day comparison closer to 85%.  In the 4th quarter of 2021 there were actually 21 more operating days in total than in 2019, as Cedar Fair extended park schedules "where appropriate."  They expect to increase operating days 35% in 2022, to almost 2,400 days (more than in 2019) and operating hours will be nearly 60% higher than in 2021.

© Cedar Fair

•  With regard to the record per capita spending, they note that all revenue channels saw increases - especially admissions, food and beverage and extra charge attractions.  Cedar Fair points out that while consumer spending was strong this year, they also credit the food and beverage lift to "building a more robust culinary infrastructure capable of delivering higher quality" offerings over the last 5 years.  

 

•  Looking just at Q4 of 2021 when compared to 2019, the results were good.  Revenues were up 36% or $94 million over 2019, attendance increased 5% or 246,000 visits and out of park revenues were up $6 million to $34 million.  Per capita spending for the quarter was up 34% as well.  EBITDA for the quarter was $73 million, a record, up $19 million over 2019.

 

•  At the end of the year the company's cash was at $61 million with $359 available on credit.  The revolver credit had no balance at year end, and no large maturities are due until 2024. 

© Cedar Fair

•  The labor market situation is still evolving and they expect to see higher labor costs again this year, mostly due to having more days and operating hours.  They do see the return of visas for international workers, which can help with staffing.  Having return employees from 2021 will also help, as 2020 was so fragmented there were much less returning workers in 2021.

•  Going cashless has helped guests to utilize apps to pay and also reduced lines in the parks.  It has also increased the number of sales per hour which is meaningful for the company.  They are also leaning on technology to continue to market to guests better and to help with labor costs.

 

•  Cedar Fair again confirmed that SeaWorld Parks & Entertainment made and offer to purchase the company, starting at $60 a unit.  They said they then "informally" upped the offer to $63 a share, however after due diligence that still wasn't an offer that was deemed "in the best interest of the company and its unitholders."  

© Cedar Fair

•  Due to the performance in the 2nd half of 2021, Cedar Fair anticipates returning the quarterly distribution to unitholders as soon as Q3 2022, possibly sooner.  No work yet on at what level it will return, but they want to make sure it is sustainable and able to grow over time.

•  Capital spending plans for 2022 include between $170 to $175 million on "new rides, attractions and other park improvements to support future growth at our parks."  That's a sizable number, which is good news for park fans.  Considering timing, a lot of that is probably to start projects for 2023.  They will also spend another $40 million to complete renovations at Sawmill Creek Resort and Castaway Bay.

•  The company will also continue to pay down long term debt until they are below $2 billion.  In December they redeemed bonds due in 2024 using $450 million cash on had, removing close to half of the debt taken on during the pandemic in 2020.

•  2022 season pass sales are strong, with a 8% increase in average season pass price and "higher penetration rates" for all-season add-ons.  Deferred revenues at year end, which is mostly from season passes, was at $198 million, up $37 million from 2019.

SeaWorld Entertainment's Offer to Purchase Cedar Fair is Dead

© Cedar Fair

SeaWorld Parks and Entertainment has confirmed via their investor relations website that their offer to purchase Cedar Fair has not been accepted and the deal is now dead.  The statement released is short and to the point:

"In response to inquiries from various stakeholders, we confirm that our offer to acquire Cedar Fair was rejected.  Unfortunately, we do not see a path to a transaction."

 

© SeaWorld Parks & Entertainment

Occasionally statements like these can be a part of a plan to make a better offer, or get some additional attention of stock/unit holders, however in this case I do trust that things are not going to be moving forward.  

Many aren't surprised that the deal is not going through, especially because Cedar Fair requires a unit holder approval of at least two thirds on items such as this proposed sale - not easy to achieve.  The original deal was reported to have been for $60 a unit, and in Cedar Fair's earnings release conference call today they confirmed that SeaWorld eventually did up it to $63 a unit.  Still, that wasn't enough to move the needle it appears.  We will take a larger look at those earnings in a Heard On... post soon.

SeaWorld Parks & Entertainment Makes Bid to Acquire Cedar Fair

© Cedar Fair

Cedar Fair has confirmed market reports that SeaWorld Entertainment has made a "proposal" that they will be reviewing.  The company's official statement does not include details on the acquisition offer, not even calling it that specifically, however the greater financial market is reporting more details.  Bloomberg reports that people with "knowledge" of the proposal mark the offer at around $60 a unit or a total of $3.4 billion.  Cedar Fair units have traded between $40 and $50 or so over the past year. 

Cedar Fair's brief statement calls the proposal "unsolicited" and "non-binding," and notes that "consistent with its fiduciary duties, and in consultation with its independent legal and financial advisors, the Cedar Fair Board of Directors will carefully review and consider the proposal to determine the course of action that it believes is in the best interest of the Company and its unitholders."

 

Saying this would be an acquisition might not even be the best word, perhaps a merger is really what could take place.  Both companies are of somewhat similar size in several key regards.  Their parks only overlap in a few markets, but do differ to a larger degree in size and offerings.  SeaWorld Parks & Entertainment has an obvious animal focus at many of their larger properties, something Cedar Fair does not focus on.  On the other hand, the latest SeaWorld Parks & Entertainment leaders in recent years seem to be leaning heavily on the addition of thrill rides that are Cedar Fair's bread and butter.  The potentially combined companies would offer a large footprint of parks that would be geographically diverse.

© SeaWorld Parks & Entertainment

There are a ton of speculative changes that could also occur with a merger of this size, not limited to renaming, intellectual property changes, potentially new Sesame Place parks popping up, potential park sales, resort expansion and more.  It's far too early to dig into those, at least on this blog - we will quietly ponder those for now.

Cedar Fair has had acquisition and merger attempts happen before, most notably a very messy one with Apollo Management that fell apart in 2010 due to unitholder displeasure.  Just a few years ago it was rumored that Six Flags also made a bid to purchase Cedar Fair, said to be worth $4 billion but never confirmed that I'm aware of, but Cedar Fair found the offer too low.

Obviously one might think that if a 2019 offer of $4 billion from Six Flags was too low that a 2022 offer of $3.4 billion from SeaWorld Parks & Entertainment would be laughed off by the board.  However, things are quite different now than three years ago, with regard to the pandemic and how both companies have rebounded from it.  I wouldn't label this offer dead in the water just yet, as there could be more to this story in the future.

Cedar Fair's Deal with Sandusky For Tax Increases to Pay for $100 Million in City + Park Improvements

© Google Maps

Cedar Point has worked out a new deal with the city of Sandusky that will see some $100 million invested in both the park and the city over the next two decades.  The improvements are of a wide variety, and will be funded through two new tax increases related to the amusement park and resort.  The improvements are not new rides and attractions, to be clear, rather infrastructure improvements and initiatives within the city.

The deal is, in my opinion, meant to be an olive branch to the city of Sandusky, which has shown concern in recent months that the company is moving its entire corporate presence to North Carolina.  While the deal does not restrict that from happening, it does show a vote of confidence on the relationship between the company and the city. 

 

The funds used for the improvements will come from an increase in the city's admission tax, up to 8% from 4%.  A new 8% parking tax will also be implemented.  These two are expected to raise nearly $5 million in additional tax monies each year.  So, that $5 million times 20 years equals the $100 million being touted.

 

No news yet on whether Cedar Point will increase ticket and parking prices to let guests pay the tax, or absorb it as a new cost.

 

© Google Maps

What will all that money go to?  Well this news story says about 50/50 improvements to the park and the city over the 20 years.  A big chunk, around $25 million will go toward totally renovating the causeway that cars travel to the park on.  It will see a 5th lane added to help with congestion, add under ground utilities, new water and sewer lines and pedestrian access and lanes.  This will help with congestion in and out of the park, also no more worries of downed electric poles or water main breaks.  It will take several years to reconstruct the whole causeway when work starts.

About $3 million will also be spent to establish ferry service to Cedar Point directly from Sandusky, with more frequent service that includes weekends.  This will hopefully entice guests to spend an extra day of their vacation exploring Sandusky.  There will also be $1.5 million that will go toward programming at the Sandusky State Theater, $14 million for a new city recreation center in town, $3 million for a tourism development fund, and close to $30 million for other changes in Sandusky such as city road improvements, beautification, pathways and parks.

© Google Maps

Also worth noting, as part of the deal the Sandusky Register reported that Cedar Fair will obtain the land of the former Sandusky Drive-In as a swap for the Boeckling Building and Jet Express pier in downtown.  I think the former drive in is in the area above that I put an orange box around - but I have no idea how big of an area Cedar Fair received (if the ownership goes all the way out to the water).  This land is right next to the Sports Force Park, so it's prime for development... perhaps as a resort or more competition fields, but obviously it's beneficial to Cedar Fair to own.

Monster Jam Thunder Alley Coming to Carowinds and Worlds of Fun This Fall

© Cedar Fair

It looks like Cedar Fair is continuing to try to squeeze as much out of 2021 as possible while the crowds are still demanding unique outdoor entertainment.  They've now announced Monster Jam Thunder Alley for both Carowinds and Worlds of Fun, both will run during the fall or in Worlds of Fun's case, the very late fall.

 

Monster Jam Thunder Alley is a great event that was first held at many Cedar Fair parks during the 2019 season (a look at my take on Dorney Park's at this link).  The attraction provides interactive displays, play areas, special retail items, parked Monster Trucks you can go in and best of all the ability to take a spin in a real Monster Truck.  It was quite fun and was a big hit at some of the parks it traveled to during 2019.

© Cedar Fair

Carowinds will be bringing the event to the theme park on Saturdays and Sundays starting September 11th through October 10th.  The event will serve as a nice transition from the end of the summer season into the Haunt season, giving visitors another reason to make a trip to the park.  

Worlds of Fun will be taking an even more unique approach by holding the event on Saturdays and Sundays starting October 23rd, smack dab in the middle of Haunt season.  Monster Jam Thunder Alley will run each weekend through November 21st, which appears to be the end of the season for the park as they do not appear to be holding Winterfest in 2021 (or going forward).  It is nice that the park is able to extend their season regardless, giving fans a chance to ride their favorite attractions till almost the end of November.

Cedar Fair Details Plans for 2022 Season at Several Parks

© Cedar Fair

On the heels of Kings Dominion's exciting announcement of a new themed area and roller coaster for next year, Cedar Fair put out a press release that details some other changes they have planned for the 2022 season.  The full released can be found at this link, we will take a look at some of the plans in more detail in this post.

 

“We’re in the business of making people happy, and we are actively investing in our parks to help us deliver the type of fun, immersive experiences that our guests crave and our associates love to provide,” said Cedar Fair President and CEO Richard A. Zimmerman. “Based on positive recent trends and our renewed confidence in the recovery of the business, we now plan to invest between $175-$200 million for the 2022 season to improve the guest experience at our parks.”  

 

© Kings Island

Kings Island will be celebrating the park's 50th anniversary in 2022.  It sounds like it will be a big celebration, perhaps on the scale of Cedar Point's 150th, but we'll have to wait a while longer for more details.  For now the company says that the celebration will feature "limited time events, enhanced food offerings and all-new live entertainment – each telling the stories of Kings Island’s first 50 years and sure to delight all ages and create lasting memories."  In order to get ready, the park is closing the Eiffel Tower after this weekend to start a total repaint of the 314 foot tall structure.  It'll be like new in '22!

 

© Knott's Berry Farm

Knott's Berry Farm will be coming off the park's 100th anniversary celebration and will spend 2022 filling the year with a series or "seasons" of events, giving visitors a ready to visit many times per year.  They will start with the Peanut’s Celebration, move into an extended Boysenberry Festival that takes place in the spring, followed by Ghost Town Alive! for the summer months, and the year will close out with both Halloween and Holiday events.  Also of note on the capital front, the company will perform a major renovation of the Knott's Berry Farm Hotel, which features more than 300 rooms.

 

© Canada's Wonderland

Canada's Wonderland will follow a similar format of featuring different seasons of fun throughout 2022, one of which will include an all-new International Food Festival with "a diverse menu of culinary tastes, treats and drinks from around the world."  There will also be a series of special fireworks displays over long weekends, Celebration Canada, KidZfest and both Halloween and Holiday events.  The park will also add a massive new "multi-level, rustic lodge-restaurant that will be the park’s largest dining facility to-date.  Inspired by the striking beauty of the Canadian wilderness, it will feature a sprawling patio overlooking Yukon Striker and the Frontier Canada vista, room for 500+ seating, and indoor and outdoor fireplaces."

 

© Cedar Point

Cedar Point will be bring back the Celebrate Parade next year, so if you didn't get a chance to check it out this year it sounds like you're set for the future.  The Springtime Frontier Festival will also return, along with Cedar Point Nights and Halloweekends.  As detailed in the earning call, both Castaway Bay and Sawmill Creek will see the completion of massive renovations.  Inside the park there will be a new "chef-inspired signature restaurant" located in Frontier Town, but no details yet on if it's a renovation of an existing space or an addition.

Cedar Fair also notes that they will continue to invest "millions" into both Schlitterbahn parks, with next year focusing on infrastructure and aesthetics throughout the parks.  Grand Carnivale will return again to six parks, including Dorney Park, Worlds of Fun, Valleyfair and Carowinds.  Next fall six parks will feature Tricks & Treats events with two others hosting other not-described-by-name family Halloween events.  Winterfest will return to 5 parks, Carowinds, Kings Island, Kings Dominion, Canada's Wonderland and California's Great America - but not Worlds of Fun it seems. (it also doesn't seem to be happening this year either at Worlds of Fun).

For those wondering, this release does not mean that it includes all changes, as there will probably be many smaller ones that will be announced later by individual parks.  It does strike me as a listing of the biggest things planned for next year, though.

Heard On... Cedar Fair's Q2 2021 Conference Call

© Cedar Fair

It is once again earning release season, let's start by looking at how Cedar Fair did in the past quarter.  The company sent out their press release last week, available a this link, with plenty of detail.  Lots of numbers in there too but as always, there was more to hear on the conference call and below are some of the more interesting points.

 

• The quarter was a bit stunted by many less operating days than in 2019, which is the year to make comparisons to since 2020 was a real dud.  In 2020 they had 393 operating days in the quarter versus 726 in 2019.  Also, Canada's Wonderland not opening until early July and that's a very profitable park for the chain.

• Revenues in the second quarter were $224 million and attendance reached around 70% of what was seen in 2019.  Excluding group sales attendance was 80% of 2019 levels.  The company squeaked out $2 million in EBITDA during the second quarter.  As far as liquidity goes, at the end of the quarter they had cash on hand of $293 million and with available amounts to borrow they had in total $652 million.  The second quarter had a positive $21 million of cash flow and they expect to be cash flow positive through the end of the year.

© Cedar Fair

• The company is continuing to offer visitors "more immersive products" such as "events that compliment our world-class attractions."  These include Grand Carnivale, Cedar Point's 150th anniversary celebration and Knott's 100th anniversary celebration.  These types of event are still a focus for Cedar Fair going forward.

 

• Season passes are making up 55% of total visits through the first seven months of the year.  That's up from 53% in 2019.  Year to date they're about 8% higher in season pass sales than in 2019.

• The company has made progress on staffing by raising wages at different parks, but still are not quite where they need to be.  While many parks are doing 7 day weeks there are five parks operating on 5 days a week schedules as the company tries to "maximize attendance up against those staffing challenges."

 

Sawmill Creek Renovations © Cedar Fair

• The company sees the increased wages they offered this year as the new normal for them, and is looking to change more positions to year-round ones to better service properties with year-round operations (like Cedar Point's Sports Center and at Knott's).  They also understand there is a big benefit to training and guest service that comes from a full time employee.

• Per caps at the parks are through the roof this year, in the month of July alone the per capita spending was $61.93, 120% of the 2019 amounts.  Sales for front of the line passes and all other in park revenue categories are way up.

 

© Cedar Fair

• In terms of capital spending, which we're all keen on, the company is focused on "responsibly investing in" their parks to enhance the guest experience but also need to pay down debt.  Through the first 6 months of the year they have spent $25 million in capital on "essential compliance and infrastructure requirements as well as the restarts of select unfinished 2020 projects."  Two of these are named as renovations to Castaway Bay and Sawmill Creek Resort near Cedar Point.  Both resorts are set to play "key roles" in expanding Cedar Point's operating calendar in the future.

• More on capital spending.  For the rest of this year they plan to spend between $50 and $75 million on finishing those hotel renovations and kicking off new projects for 2022.  The company, based on positive results in the first 7 months of this year, plans to spend between $175 and $200 million in calendar year 2022 to give "immersive and unforgettable guest experiences."  Those are significant numbers when compared to past years.  They do plan to get back to spending between 9% and 10% of revenues on capital each year in the long term.

Backbeatque at Cedar Point © Cedar Fair

• But wait, more on capital!  They note that while they will invest in attractions they also have research to show that the significance of food and beverage having high-quality offerings is key to their guests.  They also note that they had incredible guest feedback from Knott's food festival.  To that end they will "invest aggressively for the 2022 season to upgrade and expand our facilities across the portfolio, while at the same time, improving the capabilities, technologies and our efficiencies of our food preparation on delivery systems."  To be like Oprah, you get a restaurant, you get a restaurant, everyone gets a restaurant!!!  But joking aside, I'd expect to see a lot of food and beverage changes next year at all the parks, along with possibly even more food festivals.