Cedar Fair Corporate Development Discussion Thread (FUN)

[Jew]

^Your assessment of that being a "good price" fails to take into account all the investors who were long-term investors due to the dividend.

 

It's no accident the two largest share-holders have already announced they will be voting against the sale. It's a bad deal.

[Bolliger&Mabillard]

^True. But I'd have an extremely hard time believing that long term investors are going to see value in their shares if there is no dividend. Without it, investing in Cedar Fair isn't so lucrative anymore. So the assesment of this sale being a bad thing is on the assumption that the chain can become solvent without selling. Which, if the current management was confident in doing, probably wouldn't have tried to sell in the first place. I'm not saying it's not possible, or even that I believe it's not possible. It just looks to me like anyone who holds stock with this company is going to get effed either way, but selling assures you can get at least some of the money back you invested.

[Jew]

^Current management is selling because it is beneficial to them. They have no long term plan, so any way to avoid the scrutiny of shareholders is OK to them. They also have "golden parachutes" if they were to be fired by new owners. And as I pointed out earlier in the thread, they stand to profit immensely from the sale due to having options at such low prices.

 

Long-term investors are (rightfully) not wanting to give up so easily. Just because management wants to sell doesn't mean it is the best thing for the company. The company already is solvent. In fact, they turned out a tiny profit on reduced revenues.

[larrygator]

^Exactly - Management gets to cash out their stocks and are still guaranteed high paying jobs.

 

Whenever management tries to sell off any of their shares under normal conditions it comes under scrunity of all shareholders (who think management is selling because rough times are ahead). This opportunity gives management a pass.

 

Here's a payout for messing up the company and by the way you get to keep your job. Maybe if you run the company into the ground you'll make yourself millions more.

[Bolliger&Mabillard]

I see where you both are coming from and it makes sense. Where I get confused is the validity of the sale. I guess I'm rationalizing it a bit in favor of Cedar Fair solely because I don't want the company to fail. Maybe the company will be fine in the long run. As you both state it's not in horrible shape now. However, with a company that makes minimal payments on its debts [though its better than Six Flags not paying anything on theirs] and only knowing how to strengthen it's product with rides, I'm a bit worried about the long run. With who's running things now, it doesn't look so great. Not in my mind anyway.

[Jew]

^Well, if it's the safety of the company you are worried about...Selling is probably the worst option. The people who ran the company into the ground still have their jobs AND the debt doesn't disappear (Apollo would now be the one responsible for paying it).

 

Plus, where has it been said that they are only making minimal payments on their debt? The first article Adam posted makes it very clear they are in no danger of Chapter 11. Which makes it all the more suspicious management is looking to cash out.

[larrygator]

Plus as I mentioned before, Apollo Group looks to turn profit immediately. They proved with Linen and Things that if they can't turn around a company quickly, they will shut it down.

 

Then who knows what the fate of all the parks would be.

[dannerman]

That's what I've been telling friends and relatives...

 

With a company like Apollo, ANYTHING can happen. Even if the company as a whole stays afloat, they may feel that they can make more money with a Harrahs, Pennsylvania and attached AMC Movie theater on the land that occupies Dorney Park (and then they can shut down the standalone theater less than a mile away and either stop paying lease on that building, sell the land it sits on, or even gain income from leasing the land to someone else if they own it). King's Dominion is a perfect location right off of 95 for suiting developers of some type of shopping mall and/or hotel area. Maybe keep the Eiffel tower on a pay-per-ride to go up as an observation tower and little else. There are, unfortunately, a lot of other (usually more profitable) options to use a lot of the land that Cedar Fair owns around the country besides the amusement parks that they are currently used for.

 

They are not an amusement park operator. They are a money-maker. Not saying that Cedar Fair isn't in it to make money because obviously they are, but they are there to make money from amusement parks. That's what they do. They may turn an underperforming park into a waterpark and ship the rides elsewhere, but at least a lot of the rides went elsewhere, and did so fairly quickly. They didn't sit, rusting, on the used ride market.

 

If I still owned shares/units, I'd vote against the deal... LOL.

 

I think the company isn't doing anywhere as near as bad as the [mis-]management team would want people to believe. They're all getting OLD. What do old people do? They retire. They're trying to get a HUGE retirement check while they have influence, that's all. Either that or they're trying to artificially inflate the value of the stock based off the merger, planning for it to fail, and counting on a recovering economy to keep the stock price afloat once that happens.

[dannerman]

Actually, from my understanding, the debt DOES disappear.

 

Unless I'm mistaken (which is possible, LOL), I believe Apollo has the cash outright to cover the loan payoff, which is what makes the deal so favorable. The would-be-private company has no debt, thus no loan payments, and therefore all that money that would be going to interest payments is now pure profit for Apollo.

 

The only downside to Apollo is that their bottom-line takes a $1.6billion hit right now to cover paying off the debt.

[Jew]

^Nope. Apollo is just assuming the debt.

[jedimaster1227]

http://www.businesswire.com/portal/site/home/permalink/?ndmViewId=news_view&newsId=20100218007007&newsLang=en

 

Q Funding III, L.P. and Q4 Funding, L.P., which together own approximately 18 percent of Cedar Fair, L.P.’s units, sent the following letter to the company’s unitholders today urging them to vote against Apollo Global Management's proposed acquisition of the company.

 

A full text of the letter follows:

 

February 18, 2010

 

Dear Fellow Unitholders of Cedar Fair, L.P.:

 

As the largest unitholder of Cedar Fair, we urge you to vote AGAINST the proposed acquisition of our company by Apollo Global Management. This transaction, we believe, substantially undervalues the company.

 

Apollo Global Management late last year made an offer to acquire all units of Cedar Fair for $11.50 per unit. Cedar Fair’s Board recently sent you proxy materials asking you to approve the transaction even though the proposed buyout price represents what we believe to be a “bargain basement” price struck during one of the worst economic climates this country has ever seen.

 

We are Cedar Fair’s largest unitholder with currently approximately 18% of the units, and we are voting AGAINST the transaction. We urge all other unitholders to do the same. It is unfortunate that throughout this past year the units have declined as the company both endured the recent recession and battled increasingly restrictive covenants under its bank agreement, all resulting in the suspension of distributions to unitholders.

 

Apollo Global Management, a very sophisticated investor, is evidently trying to take advantage of this “perfect storm” of events to buy the company for well below what we believe to be its inherent value, particularly given the improving economy and financial markets. In our opinion, this is the exact wrong time to sell the company.

 

Since the transaction was originally announced, we believe the bank funding markets have continued to improve, and we also believe the company may be able to negotiate with its current bank group to allow some cash distributions to unitholders. In our view, as evidence the bank funding markets are improving, we need to look no further than Apollo Global Management’s success in securing approximately $1.95 billion in debt to help finance their potential transaction, a figure that is higher than the $1.63 billion of debt that Cedar Fair had outstanding on its balance sheet as of December 31, 2009.

 

We are a firm believer in this company and feel that as the economy improves, it has every chance of returning to the same unit valuations it achieved before the recession. We hope that you feel the same way and will join us in voting AGAINST this transaction.

 

Sincerely Yours,

Q Funding III & Q4 Funding

[ParkTrips]

What are the chances that the shareholders reject the plan? What percentage of the shares have been committed to nay-ing the plan? The stock could take a nice fall if it does fail.

[RCFreak]

http://toledoblade.com/apps/pbcs.dll/article?AID=/20100214/BUSINESS03/100219805/-1/BUSINESS06

 

The two big shareholders — hedge funds Q Funding III and Q-4 Funding, controlled by Texas investor Geoffrey Raynor and mutual fund Neuberger Berman LLC — could direct Cedar Fair management to sell land to raise money for debt payments or could make other demands, Mr. Lumiere said. The two shareholders, each of which bought up additional stock after the Apollo deal was announced, could seek seats on Cedar Fair's board. Mr. Raynor's two hedge funds and his personal investments control about 18 percent of Cedar Fair's stock, and Neuberger Berman holds nearly 10 percent.

 

The Knott family, founders of Knott's Berry Farm in California, which Cedar Fair acquired in 1997, could line up with the investment funds. The family, with 3.6 percent of the stock, has stated displeasure with the sale but has not indicated how they will vote.

 

If 34 percent of shareholders vote against the Apollo deal, it will be dead. Apollo's $11.50 share-price offer amounts to $635 million. The stock, traded under the symbol FUN on the New York Stock Exchange, closed Friday at $11.44.

 

^There's a nice quote for you. There's at least 28% for no with another possible 3.6% up in the air. I doubt it would take that many more to say no for this to fail.

[ParkTrips]

oh crap, I forgot that was just posted a while back.. I knew it was close. Thanks!

[robbalvey]

Our voting paperwork came in the mail yesterday. What to do...what to do....

[larrygator]

If you throw it in the trash like I did, that counts as a NO!

[SharkTums]

^Larry, quick grab it out of the trash, you know there's some Cedar Fair fanboy out there that will buy it off of you!!!

[larrygator]

I am a Cedar Fair fanboy and still threw it out.

[jedimaster1227]

http://money.cnn.com/news/newsfeeds/articles/globenewswire/184877.htm

 

Levi & Korsinsky, LLP announces that on February 5, 2010, they filed a class action lawsuit on behalf of all current holders of units of interest in Cedar Fair, L.P. ("Cedar Fair") (NYSE:FUN) in connection with Cedar Fair's attempt to sell the company to affiliates of Apollo Global Management ("Apollo"). The complaint charges Cedar Fair, Cedar Fair's board of directors, and affiliates of Apollo with violations of the Securities Exchange Act of 1934 and Rule 14a-9. In particular, the complaint alleges defendants have issued materially false and misleading statements in its proxy statement schedule 14A regarding the proposed transaction wherein Apollo intends to acquire Cedar Fair.

 

If you wish to serve as lead plaintiff, you must move the Court no later than 60 days from today. If you wish to discuss this action or have any questions concerning this notice or your rights or interests, please contact plaintiffs' counsel, Eduard Korsinsky, at Levi & Korsinsky, LLP, (212) 363-7500 or, or via e-mail at ek@zlk.com. If you are a member of this class, you can view a copy of the complaint as filed or join this class action online at http://www.zlk.com. Any member of the putative class may move the Court to serve as lead plaintiff through counsel of their choice or may choose to do nothing and remain an absent class member.

 

NO CLASS HAS YET BEEN CERTIFIED IN THE ABOVE ACTION. UNTIL A CLASS IS CERTIFIED, YOU ARE NOT REPRESENTED BY COUNSEL UNLESS YOU RETAIN ONE. AT THIS TIME YOU MAY DO NOTHING AND REMAIN AN ABSENT CLASS MEMBER. YOU MAY ALSO RETAIN COUNSEL OF YOUR CHOICE.

[G-Force!]

The plot thickens ever more. Very interested to see how this all turns out.

[jedimaster1227]

http://www.prnewswire.com/news-releases/cedar-fair-sends-letter-to-unitholders-85892052.html

 

Cedar Fair, L.P. (NYSE: FUN), a leader in regional amusement parks, water parks and active entertainment, today announced that it is mailing a letter to unitholders in connection with the previously announced acquisition by affiliates of Apollo Global Management, pursuant to which Cedar Fair unitholders will receive $11.50 in cash for each Cedar Fair limited partnership unit that they hold.

 

The full text of the letter follows:

 

March 1, 2010

 

Dear Fellow Cedar Fair Unitholder:

Your Board of Directors has scheduled a Special Meeting of Unitholders on March 16, 2010 to approve Cedar Fair's definitive merger agreement to be acquired by an affiliate of Apollo Global Management for $11.50 in cash per each Cedar Fair limited partnership unit.

 

In order to complete the merger, we need your support. Because approval of the merger requires approval by unitholders representing no less than 2/3 of outstanding units, failure to vote will have the same effect as voting against the merger. Therefore, your vote is important, no matter how many or how few units you own. Enclosed with this letter you will find an additional proxy card to cast your vote on the proposed merger. In order to maximize the value of your Cedar Fair investment, your Board unanimously recommends that you vote FOR the merger for the following reasons:

 

The Merger Provides A Premium Valuation To The Preannouncement Unit Price.

 

The transaction price represents a 43% premium over Cedar Fair's volume weighted average closing unit price over the 30 days prior to the merger announcement and a 28% premium over the closing unit price on December 15, 2009.

The Merger Provides Premium Valuation To Recent Comparable Transactions.

 

This price provides unitholders with a market valuation that is in excess of recent comparable transactions, including the Busch Entertainment and Six Flags transactions.

 

A Thorough Go-Shop Process Confirmed The Merger Maximizes Value for All Unitholders.

 

Your Board carefully negotiated this transaction to include important measures to ensure that you received the highest price for your units. Most importantly, the Company had a 40-day go-shop process during which our financial advisors contacted 32 potential buyers, including both potential financial and strategic buyers, to solicit a transaction at a higher price per unit. Despite this thorough and extensive process, we received no acquisition proposals from any of these parties. These results confirmed your Board's view that the $11.50 cash price maximizes value for unitholders.

 

Cedar Fair's Cash Distributions Are Suspended And The Return Of Future Cash Distributions Are Uncertain.

 

As you know, the Company was required to suspend the cash distribution to unitholders due to restrictions in our credit agreement and the impact of a challenging economic environment. We understand that the distribution is important to you and that it is one of the main reasons many of you invested in Cedar Fair. We did not make the decision to suspend the distribution lightly. The simple fact is, if we were to remain a public company, we do not know when or at what level the distribution will be restored.

 

If the merger is not approved, we will need to reduce and refinance our debt before we can begin to consider reinstating distributions. Despite our best efforts, we may be unable to refinance our debt in a manner that would allow us to resume distributions at any level or at all. Based on the amount of our outstanding debt, the uncertainties of the future and the experience of the last 18 months, we believe it would be imprudent to re-instate the distribution (even if our financing arrangements allowed) until we were able to reduce our outstanding debt to an appropriate level.

 

Unitholders May Be Subject To Tax Liabilities While The Distributions Are Suspended.

 

While the distribution is suspended, as a unitholder you may be required to report income or loss allocated to you from the partnership and pay any related tax liability even though you are not receiving cash distributions. Furthermore, the absence of the distribution along with a potential tax liability could reduce the public market value of Cedar Fair units and leave the Company without a catalyst for improved unit price performance for the foreseeable future.

 

Cedar Fair's Inability To Reduce Debt Could Negatively Impact Our Future Financial Condition.

 

As it stands today, our debt begins maturing in the third quarter of 2011 and if our operating performance continues to decline, we could be in danger of violating certain of the covenants in our credit facility. A failure to reduce our debt and modify the covenants in our credit facility (specifically, the leverage ratios), as well as a deterioration of current credit market conditions, could result in higher cash interest costs in the future and/or may limit our ability to refinance debt.

 

The Merger Maximizes Value For Unitholders And Enables Unitholders To Capture A Cash Premium Valuation Today And Eliminate Future Uncertainty.

 

The Company's ability to achieve historical levels of growth in the amusement park space is uncertain. Given the uncertainty regarding economic outlook, future attendance expectations and credit markets as well as the constraints of our capital structure, we believe it will likely be more difficult to drive value for the Company and our unitholders in the future. The merger enables unitholders to capture a premium valuation in cash today and avoid the uncertainty and execution risks facing the Company.

 

FOR ALL OF THESE REASONS, THE CEDAR FAIR BOARD OF DIRECTORS UNANIMOUSLY BELIEVES THAT THE MERGER IS IN THE BEST INTERESTS OF ALL UNITHOLDERS AND URGES YOU TO VOTE FOR THE TRANSACTION

 

To be sure your vote is represented at the special meeting, please take a moment to vote your units by telephone or internet TODAY - simple instructions are contained on the enclosed proxy card. Alternatively, you may sign, date and return the enclosed proxy card by mailing it in the prepaid envelope today.

 

We urge you to cast your vote FOR, to realize an immediate cash premium for your Cedar Fair units.

 

On Behalf of the Board of Directors,

 

/s/ Richard L. Kinzel

Richard L. Kinzel

Chairman, President and Chief Executive Officer

[Jew]

"We screwed you over once, and we're begging you to accept this buyout so we no longer have to face public scrutiny for our horrible management of the company"

[Bolliger&Mabillard]

Cedar Fair's Cash Distributions Are Suspended And The Return Of Future Cash Distributions Are Uncertain.

As you know, the Company was required to suspend the cash distribution to unitholders due to restrictions in our credit agreement and the impact of a challenging economic environment. We understand that the distribution is important to you and that it is one of the main reasons many of you invested in Cedar Fair. We did not make the decision to suspend the distribution lightly. The simple fact is, if we were to remain a public company, we do not know when or at what level the distribution will be restored.

If the merger is not approved, we will need to reduce and refinance our debt before we can begin to consider reinstating distributions. Despite our best efforts, we may be unable to refinance our debt in a manner that would allow us to resume distributions at any level or at all. Based on the amount of our outstanding debt, the uncertainties of the future and the experience of the last 18 months, we believe it would be imprudent to re-instate the distribution (even if our financing arrangements allowed) until we were able to reduce our outstanding debt to an appropriate level.

Hmm. This is what stuck out the most to me. I know that everyone is saying that the company isn't as bad off as everyone thinks, but when the CEO, the company's most vocal cheerleader says things like this, it just makes you cringe. Can't wait to see how this one unravels.

[Jew]

^What else is he going to say? The board wants the deal to be approved.

 

That letter only presents the worst case scenario as a way to justify the sale. A sale in which Kinzel will pocket almost $4 million from selling his shares AND still be able to keep his job (or get himself a "golden parachute" if he gets fired).

[dannerman]

I read it as saying...

 

"If you don't forward this email to 10 people, then bad stuff will happen. Take the story of John Smith who got this email. He deleted it without forwarding it on and 2 days later his wife filed for divorce. On the same day, his boss came to him and told him he was underperforming and they would have to let him go. If that wasn't enough, when he was driving to court for the divorce hearing, he got into a car accident and was in a coma for 2 months!!!!! Don't let this happen to you!!! Forward it now so you don't forget!!!!"

 

Seriously? Do you expect people to believe your doom-and-gloom horror stories? It's just a bunch of scare tactics and misleading information to try and get people to vote for it.

 

The kicker is how they're pleading people just to simply vote since no vote = "No" vote. I wouldn't be surprised if Stacy Frole's job for the next 2 weeks is calling EVERY unitholder and reminding them to (or even guiding through how to) vote.