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Cedar Fair Corporate Development Discussion Thread (FUN)

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I do not understand the argument. It reads like, "Because we don't know when the dividend will come back, you should also sell at a loss."


I've become more skeptical about this deal. Cedar Fair serviced and reduced their debt during the worst of the recession with reduced attendance and spending. Sure, they couldn't pay a dividend at the same time, but they are keeping their head above water. They'll probably be strong again when the economy recovers. If they can't pay a dividend for a few years while they deal with their debt, then so be it. Why lose the dividend and a huge amount of stock value? Why sell at the worst possible time?

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They know who bought this stock. The dividend was a nice reason for long termers to buy the stock, as it was fairly stable and paid a good dividend, but even at the peak of $0.48/share, this huge losses would amounts to about 8 years worth of dividends if you bought in the mid-upper $20s! I'd be less worried about the dividend than getting my initial investment back

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Before agreeing to a $2.4 billion purchase offer by Apollo Global Management LLC, executives of Cedar Fair LP weighed the idea of putting the company up for bid at a competitive auction, the Sandusky amusement park chain revealed in a new regulatory filing.


Cedar Fair, which has asked its investors to support the Apollo deal at a special shareholders meeting March 16, rejected the auction idea after considering its cost and the risk that Apollo would not participate in the auction. In an addendum to its proxy statement already filed with the U.S. Securities and Exchange Commission, Cedar Fair said its financial investors believed that an auction was unnecessary because any interested parties would approach the company later during a 40-day “go-shop” period that occurred after the Apollo deal was announced. The shopping period, which ended in late January, allowed Cedar Fair to strike a deal with any buyer willing to top Apollo’s deal. Several parties contacted Cedar Fair during the period, but none made a purchase offer.


In its filing, Cedar Fair also disclosed that as an alternative to the sale to Apollo, its board twice discussed making changes to its capital and corporate structure, refinancing or restructuring corporate debt, and other strategic options. However, the board each time determined that the best course for its shareholders was to continue discussions with Apollo.


Many shareholders, including Cedar Fair’s two largest, have come out against the Apollo deal. The largest shareholder — a pair of Texas-based investment funds, Q4 Funding and Q Funding III have argued Apollo’s purchase offer of $11.50 a share is too low.


On Friday, an independent investment advisory firm, Egan-Jones Proxy Services, issued a report recommending shareholders vote for the sale to Apollo, concluding that it is the best way to maximize shareholder value. Among its arguments, Egan-Jones said the $11.50 price is a 43 percent increase in share value compared to the value of Cedar Fair shares in the 30 days prior to the announcement of the Apollo deal. It also said that the volatile economy and the near-term and long-term uncertainty about economic conditions nationally and within the amusement park industry favored approval. Egan-Jones said that alternatives to the sale were less favorable and a defeat risks a harmful effect on the company’s operations and its relationships with customers and suppliers.

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SANDUSKY, Ohio, March 15, 2010 – Cedar Fair, L.P. (NYSE: FUN), a leader in regional amusement parks, water parks and active entertainment, today announced that, pursuant to the terms of the merger agreement with affiliates of Apollo Global Management, the special meeting of unitholders to consider and vote on the merger agreement, which had been scheduled for March 16, 2010, has been postponed. The special meeting of unitholders will now be held on April 8, 2010. Additional information regarding the meeting, including time and location, will be provided at a later date.


The special meeting has been postponed for the purpose of soliciting additional votes and proxies and giving unitholders additional time to consider and vote on the proposed acquisition. During this time, unitholders will continue to be able to vote their units, or to change their previously cast votes.


Cedar Fair unitholders are reminded that their vote is extremely important, no matter how many or how few units they own. Unitholders are advised that if they have any questions or need any assistance in voting their units, they should contact Cedar Fair’s proxy solicitor, Mackenzie Partners, Inc., toll-free, at 1-800-322-2885.


"The special meeting has been postponed for the purpose of soliciting additional votes and proxies [...]" Seems like they've lost confidence in the likelihood that this will happen and are going to try some last-ditch effort to convince unit holders to vote in favor of the acquisition. Somehow, I don't think the delay will do much good.

Edited by jedimaster1227
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Unitholders need to get rid of this management team. They are clearly not operating in the best interests of shareholders by trying everything in their power to push this deal through.

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Talk about a wild ride. The amusement park operator Cedar Fair announced on Monday night that it had postponed Tuesday morning’s meeting for unit holders to vote on the company’s acquisition by Apollo Management, saying it wanted to provide more time to solicit votes and proxies. For those unit holders who have already made the trip up to Sandusky, Ohio, for the meeting, they will have a relatively long wait. The meeting is postponed until April 8. Perhaps Cedar Fair will placate these unit holders with some free amusement park tickets in the interim.


The meeting was postponed instead of adjourned in order to avoid a vote by Cedar Fair’s unit holders on adjournment, as well as some issues under Delaware corporate law.


Steven M. Davidoff, writing as The Deal Professor, is a commentator for DealBook on the legal aspects of mergers, private equity and corporate governance. A former corporate lawyer at Shearman & Sterling, he is a professor at the University of Connecticut School of Law. He is the author of “Gods at War: Shotgun Takeovers, Government by Deal and the Private Equity Implosion,” which explores modern-day deals and deal-making.

The limited partnership agreement appears to allow both unit holders and the general partner to adjourn the meeting. However, an adjournment by unit holders would have required a vote, while an adjournment by the general partner would be scrutinized by the Delaware courts under the case of Mercier v. Inter-Tel and possibly found without a compelling justification. At least, this is what it appears to be, as things are murky here because Cedar Fair is a limited partnership and the default rules governing what happens in these circumstances do not exist as it would with a corporation.


Instead, we are left with the bare rules set forth in the limited partnership agreement.


A postponement simply avoids these issues and can be made by the general partner of Cedar Fair. The company’s partnership agreement tracks the Delaware General Corporation Law, which requires that the “record date shall not be more than 60 nor less than 10 days before the date of such meeting.” The agreement (in section 15.7) also appears to allow for one adjournment for up to 30 days beyond that without having to reset the record date. So, this postponement does not raise issues of having to reset the record date, something that also could be viably challenged under Delaware law.


In addition, under Section 5.04 of the acquisition agreement, Apollo and Cedar Fair jointly agree that Cedar Fair can adjourn the meeting as far back as the April 8 date. However, the acquisition agreement (section 5.04) also appears to allow for Apollo to demand additional 15-business-day adjournments or postponements up until May 10. If this occurs, the record date of Feb. 12 (the date on which the unit holders who can vote is determined) would then need to be reset unless the meeting were adjourned, setting off a 30-day extension of the record date period.


Of course, an adjournment would raise the specter of a vote by unit holders on this issue. Meanwhile, a postponement could be challenged in Delaware since it appears to require that the record date be reset and would rejigger the base of unit holders who can vote on this transaction. Again, there is a lack of clarity here.


Ultimately, this all is a lesson for deal lawyers and companies about getting their shareholder bylaws and the merger agreement mechanics on postponements and adjournments right in advance. Targets should be aware that granting a bidder the right to demand a meeting extension can clash with Delaware law. limiting a target’s ability to postpone or adjourn the meeting and in conjunction reset the record date.


Cedar Fair needs two-thirds of all its unit holders to vote yes on the acquisition by Apollo. Given the positions held by Q Investments and Neuberger Berman, which oppose the transaction and together hold total a 27 percent stake in the company, the odds of keeping another 7 percent of the unit holders from voting no — or not voting at all — appears low. This is particularly true since the company went zero for three in the proxy rating agency recommendations. All of them have recommended against this transaction.


So why the delay? Well, there is the possibility of a deal during this time and an increase in the consideration, and that may be justification enough for the postponement. Private equity is plowing into the amusement park industry and perhaps Apollo can make a purchase of Six Flags or another property to find some synergies or cost savings and justify a price increase.


Still, Apollo, which was founded partly by people formerly with Drexel Burnham Lambert, never struck me as a kinder, gentler private equity firm. They showed in the Huntsman-Hexion deal that they were not afraid of taking a hard-line economic position despite any hits to their reputations. And really, what reputational hit is there for refusing to increase your bid? So, I am skeptical that they will raise in this environment given the lack of competing bidders. But then again, I bought Ask Jeeves back in the Internet boom at $150 a share, so what do I really know?


Alternatively, Cedar Fair is pushing forward a time-tested argument in failing deals. It is basically the “we stink” argument. In essence, the results are not great, and the company has too much debt and a partnership structure that does not work if it cannot pay dividends. So, vote for a sale since this is the best you are going to get. Of course, as management we’ll still stick around to take part in any possible upside. I’ve seen this argument before and it can work and cow shareholders into a yes vote, although the presence of such a large stake in opposing hands and the high threshold vote here makes it unlikely.


But here is some free advice for the Cedar Fair board. If Apollo raises its bid, it will also seek to increase the break-up fee from the $6.5 million currently payable by Cedar Fair to Apollo if there is a no vote. This is what Carl C. Icahn did in the Lear deal in 2007 and it was upheld there by the Delaware court. Resist this. Apollo’s willingness to raise its bid and its sunk costs have nothing to do with more recompense on the down side. This is particularly true if you do not speak to Q Investments beforehand to see if this is a deal the hedge fund is willing to take. Apollo would raise its bid based on the economics of the deal, not any additional incentive if unit holders vote no. Doing otherwise is simply giving away the unit holders’ money.

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Cedar Fair Entertainment Co.'s largest shareholder said today that it would continue to oppose the company's proposed sale to Apollo Global Management no matter the price. The Texas-based hedge fund manager, called Q Investments, wrote a letter to Cedar Fair's board responding to rumors that Apollo is working to secure more than $100 million in additional financing and could increase its current bid for Cedar Fair by $2 per share.


In line with the rumor, the Sandusky amusement park company postponed a meeting this week at which shareholders were to have voted on Apollo's existing $2.4 billion proposal to buy Cedar Fair's assets and pay its debt. Under the deal, investors would receive $11.50 per limited partner unit.


On Monday, DealReporter.com, a Web site geared to investment fund managers, quoted unnamed sources saying they expected the Tuesday meeting to be postponed to reflect an offer of $13.50 per share. It was, and the meeting now is set for April 8. The rumor sent the share price up 10 percent to close at $12.24 on Monday. Today, shares dropped back down to $12 after Q Investments said in a regulatory filing that its opposition to the sale was "not a matter of price." The firm, which owns 18.1 percent of Cedar Fair, said it would not support any transaction that does not allow it to "participate in the long-term value of the business."


Cedar Fair needs the support of two-thirds of shareholders for the acquisition deal to go through. Neuberger Berman, an investment firm that owns 9.6 percent of the company, said last month that it also would vote against the deal.


Q Investments said in its letter that it is afraid delaying the shareholder meeting could affect Cedar Fair's ability to refinance its $1.7 billion outstanding debt by causing it to violate covenants and, potentially, to default.


Cedar Fair spokeswoman Stacy Frole said, "We always appreciate hearing comments and concerns from our unitholders and we will take their letter into consideration as we move through this process."

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Now if Apollo increased their offer to $13.50 a share that's something I would consider, but $15.00 is the magic number for me.


My only concern with Apollo increasing their investment is that they might have less patience in the turnaround process.

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^$15 does sound like a more fair offer, but I think you are dead on if Apollo has to up the ante they're going to either want to see a quicker return, a larger return or both. And if all things considered were to fall through, one can only imagine what financial situation that would put under the parks (Apollo deeming a park as "underperforming" much quicker than previously before, and an increase in capital improvements as they are no longer deemed as necessary).

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  • 3 weeks later...

The deal has been terminated.


Cedar Fair Entertainment Co. and Apollo Global Management agreed to terminate their pending merger deal, Cedar Fair said Tuesday.


The theme park owner, whose holdings include Kings Island amusement park in Mason, will pay Apollo $6.5 million to reimburse it for expenses related to the negotiations, according to a new release.


Cedar Fair signed a definitive merger agreement in December with Apollo, a New York-based private equity firm. But several of Cedar Fair's largest shareholders criticized the deal, saying the $11.50 a share offer was too low.


“The board has heard from Cedar Fair unitholders and it is apparent that the merger transaction does not have the required level of investor support,” said CEO Dick Kinzel in the release.


A special shareholders meeting to vote on the merger, scheduled for Thursday, is canceled, the company said. The annual shareholders meeting will take place June 7.


Cedar Fair’s parks and attractions have suffered from lower attendance as a result of the recession. For its fourth quarter, the company posted a net loss of $26.3 million, or 47 cents per share, compared to a net loss of $56.7 million, or $1.02 per share, in the year-ago quarter. Net revenues fell to $105.6 million from $119.3 million.


Shares of Cedar Fair (NYSE: FUN) opened at $12.20 Tuesday morning.


Cedar Fair, headquartered in Sandusky, is a publicly traded partnership that owns and operates amusement parks, waterparks and hotels in eight states and Ontario.


Read more: Cedar Fair, Apollo terminate merger deal - Business Courier of Cincinnati:



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The most interesting part of all of this is the "unit holder rights plan" which can kick in when someone gets 20% ownership of the company.


Just a coincidence that comes right after an investment firm that owns 18% of the company opposed their bailout deal?


Cedar Fair needs a new management team ASAP to have any chance of surviving.

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Dick Kinzel is part of the reason Cedar Fair (and Cedar Point) are as good as they are today? What did they have like a 18 consecutive year streak of paying dividends to shareholders? Tell me another company in this industry that has done that?

He was an important member of the Cedar Point management team. Without him, who knows how big and popular Cedar Point would be today. The problem is times have changed and he has not, which shows he needs to be replaced.

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Yeah I was a little surprised about the $6.5 Million but that sometimes is part of these deals. Kinzel was supposed to retire but he stayed on to see the Paramount acquisition through. Now that is over but they still have the enormous debt. In my opinion I think Cedar Fair will be just fine in the long term. It's the next few years that will be a little more rough. By the way the streak was 21 years of paying dividends with this year being the first they didn't.



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^Cedar Fair is doomed if the current management team stays in place. They clearly have no idea how to deal with the debt, and now even went as far as enacting a "poison pill" plan to protect themselves knowing full well a small majority of shareholders own enough stock to make changes.

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