SeaWorld continues to expand with $3.4 billion buyout bid of Cedar Fair

click to enlarge The Gatekeeper wing coaster and Cedar Point's front entrance plaza - Image via Jeremy Thompson/Wikimedia Commons
Image via Jeremy Thompson/Wikimedia Commons
The Gatekeeper wing coaster and Cedar Point's front entrance plaza
In one of the biggest signs yet that things are different on this side of the pandemic, Orlando-based SeaWorld Parks has made a bid to buy Cedar Fair in a deal valued at $3.4 billion.

With a per-unit price of $60, the all-cash deal is roughly $10 per-share less than a similar failed cash and stock bid that Six Flags made towards the chain in 2019. Since then, Cedar Fair has struggled with the rapidly changing realities of the pandemic; meanwhile, the once besieged SeaWorld Parks and Entertainment has seen massive success with their mix of limited capacity and outdoor-focused events that allowed every park in the chain to reopen even as Cedar Fair parks sat dormant.

Nearly ten years out from the Blackfish-fueled outrage that saw SeaWorld in the most intense battle to remain open since the chain first began welcoming guests in the 1960s, the company has steadied under chairman Scott Ross. Ross took control of SeaWorld via his private equity firm Hill Path when the company was in the midst of the rough seas brought on by Blackfish and Universal’s then-new Wizarding World.

Despite rumors that Ross was prepping SeaWorld to be sold, either to another amusement operator or as individual properties, the Orlando chain has continued to add significant new investments to each of the five major parks and has greatly expanded the Sesame Street presence across the company’s portfolio. That, along with an annual pass model first laid out by former CEO Joel Manby, caused the company to rebound faster than many expected, and by 2019, stocks were trading at more than twice what they were valued just two years prior.

The pandemic forced the company to close all of its parks, but by the summer of 2020 they were already reopening in some locations. In places with more robust COVID protocols, such as Virginia and California, the company offered drive-thru experiences and animal-focused offerings. Six Flags attempted similar ways to generate some sales while Cedar Fair mostly sat out with their parks having large windows of closures throughout 2020 and 2021.

That move to play it safe over the past two years while others innovated new revenue models has caused Cedar Fair to face continued disappointing earnings reports. Meanwhile, U.K.-based amusement operator Merlin has ramped up its North American operations, opening its third U.S. Legoland resort last year and will open a new Peppa Pig Theme Park in Central Florida in just a few weeks, its second theme park at the Legoland Florida resort.

SeaWorld previously laid out an expansion roadmap that seemed that draws heavily from Merlin’s European success with a mix of thrill parks and kid-focused offerings. The move to buyout Cedar Fair could dramatically speed up those plans, laying claim to many of the nation’s most extreme thrills rides, especially at its flagship parks, Cedar Point in Ohio and Knott’s Berry Farm in Southern California. The Ohio-based chain is one that SeaWorld Board Chairman Scott Ross is already intimately familiar with. Before launching Hill Path, Ross served as a Partner at Apollo Management. While there, he was part of the team that attempted to buy out Cedar Fair in a $635 million takeover. That deal was ultimately rejected by Cedar Fair investors. Just four years later, Ross left Apollo to launch the amusement and hospitality investment-focused Hill Path Capital.

The proposed Cedar Fair deal is below previously rejected numbers. Still, the all-cash offering could be more appealing to stockholders who haven’t seen their units of Cedar Fair come close to the $60 per unit value the deal proposes since late 2019. When Six Flags approached Cedar Fair in their cash and stock deal, shares of Six Flags were already struggling after underperforming for the past two years.

The SeaWorld deal may also be more beneficial for park-goers than the previous Six Flags one despite Six Flags having more amusement parks. Cedar Fair has struggled with its park events and food offerings, both of which are things that SeaWorld has seen huge success in recent years. SeaWorld has been ramping up its efforts to add hotels, something that Cedar Fair already has experience with. Cedar Fair has a broader range of water park brands, including the world-famous Schlitterbahn water parks in Texas and an indoor water park at its flagship resort in Sandusky, Ohio. Just as SeaWorld is transforming Aquatica San Diego (a water park previously owned by Cedar Fair when it was known as Knott's Soak City U.S.A.) into the next Sesame Place amusement and water park, the company could easily do the same with other Cedar Fair water parks. Cedar Fair's Dorney Park sits just an hour away from the original Sesame Place while many of the other Cedar Fair parks are in markets not currently home to SeaWorld properties.
click to enlarge SeaWorld Abu Dhabi Aerial Render - Image via PRNewsfoto/Miral, SeaWorld Parks & Entertainment
Image via PRNewsfoto/Miral, SeaWorld Parks & Entertainment
SeaWorld Abu Dhabi Aerial Render
There’s also the possibility that SeaWorld may dust off its previous plans for smaller standalone aquariums, similar to the SeaWorld Abu Dhabi park that is now under construction, and Sesame Street-themed family entertainment centers. Having these offered alongside Cedar Fair amusement parks could turn parks that are otherwise a single-day attraction into a multi-day resorts, which both companies have expressed interest in doing. This synergy also better positions both park chains to compete against new investments from Merlin and Six Flags while increasing their annual passholder bases.
click to enlarge A slide from a 2015 investor presentation showing potential development sites on SeaWorld's Park Orlando resort.
A slide from a 2015 investor presentation showing potential development sites on SeaWorld's Park Orlando resort.
After news of the proposed buyout broke on February 3, there's been talk of next steps if the deal doesn't materialize. There’s still a possibility that the SeaWorld news will cause Six Flags to once again express interest in Cedar Fair, or SeaWorld may even express interest in Six Flags. Still, the marriage between SeaWorld and Cedar Fair seems the most advantageous, especially with the all-cash offer. Many analysts note the $60 per share offer is a bit low. However, with the company still trying to find its post-pandemic footing, the possibility of $70 per share now seems like a distant memory from the beforetimes, so it might not take much for SeaWorld to convince them to join its unlikely success story.



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