Cedar Fair Development Discussion Thread

The latest news surrounding the proposed sale (and its accompanying lawsuits) has been released on multiple news sites. Details surrounding the consolidation of the 11 suits into one and the voting by Q Investments in regards to the merger has been quoted below.

http://www.sanduskyregister.com/article ... 877678.txt

After several hours of negotiations, the 11 court cases fighting the Cedar Fair sale have been consolidated into one.

Nineteen attorneys deliberated in an Erie County jury room and decided the first case filed, on behalf of Indiana resident Todd Miller, would lead the legal battle against the acquisition of the amusement company.

Now that the lead case has been chosen, the attorneys for unitholders who filed the suits must agree on a single amended complaint. They have until next Tuesday to send that to the attorneys for Cedar Fair and its corporate suitor, Apollo Global Management. Attorneys for the two companies have until Feb. 9 to respond.

Attorney Kenneth Vianale spoke on behalf of unitholders during Thursday's hearing. His firm, Vianale and Vianale, represents three of the clients in the growing cluster of complainants.

He said previous attempts to work out the organizational structure of the lawsuit failed.

Erie County magistrate Steve Bechtel said he did not want the court buried in motions that would take time away from hearing the merits of a motion to dismiss the case. He asked the attorneys to try to resolve this issue before leaving the courthouse Thursday.

What remains to be settled, however, is whether the lawyers will be given their request for a speedy discovery process. They argue the preliminary proxy statement that unitholders may use to help decide whether to vote for the sale may contain inaccurate or insufficient financial information. The unitholders need to prove this to argue for an injunction to stop the sale while the case is heard.

To help determine if the information is faulty, Vianale argued they need to take depositions from financial advisors for Cedar Fair.

He also questioned how two corporations, supposedly acting independently, can choose the same 16 companies for financial analysis without being questioned by the board. The 16 companies included theaters, restaurants, casinos and entertainment, but left out Disney, Great Wolf Resorts and Vail Resorts.

Cedar Fair CEO Dick Kinzel's son previously worked for Great Wolf Resorts.

Unitholders also want to see board minutes from meetings in which company officials discussed the sale.

Bechtel said the lawyers have until Jan. 27 to come to an agreement on what information will be shared or whether the court will rule on the unitholders' request.

http://www.sanduskyregister.com/video?a ... nerclipid=

http://www.cedarfair.com/ir/press_relea ... ory_id=211

SANDUSKY, Ohio, January 22, 2010 – Cedar Fair, L.P. (NYSE: FUN), a leader in regional amusement parks, water parks and active entertainment, today made the following statement in response to the announcement issued today by Q Funding III, L.P.:

The independent members of the Cedar Fair Board of Directors undertook a lengthy and thorough process to evaluate all options to address the Company’s capital structure and best serve the interests of our unitholders. After carefully weighing numerous alternatives and the outlook for the business, the Board determined, and continues to believe, that the proposed acquisition of Cedar Fair is the best option to maximize value for all unitholders. This transaction was thoroughly negotiated and includes protections for unitholders, including a go-shop process in which the Company has been actively soliciting alternative proposals. The offer price of $11.50 in cash per Cedar Fair limited partnership unit represents a 43% premium over Cedar Fair's volume weighted average closing unit price over the 30 days prior to the transaction announcement and a 28% premium over the closing unit price on December 15, 2009. This valuation also exceeds those of the recent comparable transactions in our industry.

We always welcome the views of our unitholders with the shared goal of enhancing value. Q Funding has not contacted us about the merger or the Company’s prospects.

We look forward to having the opportunity to speak with our unitholders regarding the merits of this transaction. We urge all unitholders to carefully review the Company’s definitive proxy materials when mailed before making a decision about how to vote.

http://www.cleveland.com/business/index ... holde.html

The new largest shareholder of Cedar Fair Entertainment Co. said Friday that it will vote against the Sandusky company's proposed sale to private equity firm Apollo Global Management.

Q Investments, a Fort Worth, Texas-based firm that increased its equity stake in Cedar Fair to 9.8 percent this month, said it "does not believe it makes sense to vote for the merger and effectively sell at $11.50 when a holder can sell in the market for a higher price." It is urging other shareholders to vote against the deal as well.

Cedar Fair said the public proclamation came as a surprise since Q Investments did not contact the company about its concerns. The amusement park operator says it stands by its board's recommendation to approve the deal.

The board "undertook a lengthy and thorough process to evaluate all options to address the company's capital structure and best serve the interests of our unitholders," the company said in a statement. Cedar Fair needs approval from holders of at least two-thirds of the company's shares before the sale to Apollo can go through. The date of the vote has not yet been set.

Under the terms of the proposed acquisition, Apollo would buy Cedar Fair's assets for $635 million, as well as pay off its more than $1.7 billion debt, making the deal worth $2.4 billion. Investors would get a pay-out of $11.50 per unit. That's 27 percent more than the $9.08 closing price on Dec. 16, the day the planned acquisition was announced. But, in recent weeks, shares have been trading above $11.50.

On news of Q Investment's announcement, Cedar Fair's unit price increased 3.7 percent, or 45 cents, to close at $12.66 on Friday. James Hardiman, a senior equity analyst at FTN Equity Capital Markets, said some investors appeared to be buying Cedar Fair shares over the past few weeks on a hunch that Apollo could up the ante, or that another firm would make a bid. Cedar Fair says it has been actively soliciting other proposals during a "go-shop" period that ends on Jan. 25.

Q Investments appears to be among those speculating that it will be able to get more than $11.50 for its shares of Cedar Fair one way or another. The investment firm filed a disclosure with the SEC on Tuesday to report its stake in Cedar Fair had surpassed 5 percent.

It is unclear whether the company previously held any Cedar Fair units, but the disclosure means Q Investments bought millions of shares within the past two weeks, when units were trading at above $11.50. The company's holdings, owned through a subsidiary called Q Funding III LP, are worth more than $60 million.

After Q Investments, the largest Cedar Fair shareholders are investment firm Neuberger Berman, which owns 8.8 percent of shares, and Cedar Fair Chairman, Chief Executive and President Richard Kinzel, who owns 2.25 percent. Neuberger Berman declined to comment on its position on the Apollo deal.

The vast majority of Cedar Fair shares are held by individual retail investors, many of whom have also expressed discontent with the acquisition offer. Several lawsuits have been filed on behalf of investors in Erie County Common Pleas Court alleging that the board violated its obligation to do what is in their best interest. Those lawsuits are expected to be combined into one class-action suit. Cedar Fair says it believes the complaints are without merit.

http://www.businessweek.com/ap/financia ... FG3D00.htm

Cedar Fair LP said Tuesday that it is proceeding with its proposed $635 million acquisition by asset manager Apollo Global Management.

The amusement and water park operator said in a filing with the Securities and Exchange Commission that it reached out to 32 other potentially interested parties during the 40-day period in which it was allowed to try to find alternative bids. In that time Cedar Fair, based in Sandusky, Ohio, said six of the parties wanted confidential company information in order to evaluate a possible deal but none of them wound up making an offer.

Now that the go-shop period has ended, Cedar Fair said in the filing that its board still believes the proposed deal with Apollo maximizes value for its unitholders.

Cedar Fair owns and runs 11 amusement parks, six outdoor water parks and five hotels, including Cedar Point in Ohio, Canada's Wonderland near Toronto, Dorney Park in Pennsylvania and California's Knott's Berry Farm and Great America.

The potential acquisition comes at a time when the company has struggled to keep consumers coming to its properties. With the economy still fairly fragile and unemployment numbers high, many consumers have pulled back on their discretionary spending, which has pushed amusement and water park attendance levels lower.

Even rival theme park operator Six Flags has succumbed to recessionary pressures, filing for bankruptcy protection in June.

Cedar Fair accepted Apollo's $11.50 per share offer last month. The transaction's total value is estimated by the companies at $2.4 billion, which includes the assumption of debt.

At the time Cedar Fair agreed to the acquisition, the offer price was a 27 percent premium to its closing stock price of $9.08. The shares fell 29 cents, or 2.3 percent, to $12.49 Tuesday morning, or 8.5 percent above the offer price.

The acquisition is expected to close by the start of the 2010 second quarter. It is dependent on regulatory clearance and holders of two-thirds of the company's shares supporting the transaction.

http://toledoblade.com/apps/pbcs.dll/ar ... BUSINESS10

Chances to complete the $2.4 billion sale of Cedar Fair LP to Apollo Global Management LLC have grown dimmer, given the delay in scheduling a shareholder vote and with two big stockholders now opposing the deal. "I think the market is showing that the deal is not going to go through at this point," said Robert Routh, a Denver equity analyst with Wedge Partners Corp. One possibility, he said, is for the New York private equity firm Apollo to offer a higher bid to entice stockholders to favor the transaction.

The deal, announced Dec. 17, calls for Apollo to assume Cedar Fair's $1.6 billion debt load and pay its shareholders $11.50 a share. But with shares trading over $12 since Jan. 20 and daily trading volume exceeding 1 million shares 10 times since the purchase of the Sandusky amusement park company was announced, Mr. Routh said, "it leads you to the conclusion that all the institutional investors are not selling their stock, which clearly means the price per share is too low and can be renegotiated. "Because if not, the institutional investors wouldn't be waiting for the deal to close. They'd sell now."

The second-largest investor in Cedar Fair, mutual fund Neuberger Berman Group LLC, disclosed yesterday in filings with the U.S. Securities and Exchange Commission that it has purchased more shares - or "partnership units" - of Cedar Fair, raising its total investment to 9.6 percent from a previous 8.8 percent. Neuberger stated it will vote against the Apollo acquisition, joining hedge fund Q Funding III, which is on record against the deal and controls 12 percent of Cedar Fair shares.

Stacy Frole, Cedar Fair's director of investor relations, said the company maintains regular contact with Neuberger, which has been an institutional shareholder for several years. "We'll continue to reach out to our investors, both institutional and retail, to answer any questions and explain things," she said. "We still support the deal with Apollo at $11.50, which is a premium to what our units were trading at the day before the transaction."

On Dec. 16, Cedar Fair shares closed at $9.06 on the New York Stock Exchange. Yesterday they closed at $12.19, down 8 cents. Cedar Fair owns 11 amusement parks, including Cedar Point in Sandusky, and six water parks in the United States and Canada. A "no" vote by 34 percent of the company's 55.2 million outstanding shares would kill the deal. The two big stockholders who oppose the deal hold 21 percent.

With Cedar Fair shares being owned by many small investors, many of whom are upset by the deal's $11.50 share price, the prospects of passage are in jeopardy, Mr. Routh said. "If most investors felt the deal was going to go through at $11.50 it would be trading at that price or less. But it's around $12.25," he added. Mr. Routh said he thinks there "a fairly good chance" Apollo may renegotiate the $11.50 price before a vote on the deal occurs. But how much higher it would go and when it might step in - if at all - are the big questions, he said.

Steven Davidoff, a mergers expert, former corporate lawyer for Shearman & Sterling, and a law professor at the University of Connecticut, has been tracking the Cedar Fair-Apollo deal. The transaction is "clearly on the ropes," he said. And if the deal is voted down and Apollo walks away from the deal, it could be harmful for Cedar Fair's management. There would be "a real issue with the current management that got you into this problem," Mr. Davidoff said. "At that point, you have the issue of what do you do? Do you replace them? Do you incentivize them? … It's something the [Cedar Fair] board really would have to think about." Mr. Davidoff said the biggest unknown is what happens if Apollo doesn't sweeten the deal, it is defeated, and Apollo walks away. "They may decide … they don't want to get into a bidding war with themselves. They may want to come back in a year and buy Cedar Fair at an even lower price, or they may just walk away."

[dannermanWhich came first the turtle or the donkey?]

I sold all my shares when it got to $13/share. I figured the price was too high to pass up if the deal did wind up going through.

Although I'll buy them all back if it drops back down to $11/share.

http://www.sanduskyregister.com/articles/2010/02/09/front/1907118.txt

Texas investment banker Geoffrey Raynor has vowed to block the Cedar Fair deal with Apollo, and he now controls 9,383,176 'No' votes. SEC documents show Raynor now controls 17 percent of Cedar Fair's outstanding units, up from the 9.8 percent he held Jan. 20. That's the biggest chunk of Cedar Fair units controlled by any single voter.

Apollo Global Management's $2.4 billion offer to buy Cedar Fair must win approval from two-thirds of the possible votes. Each outstanding unit represents one vote, so someone who holds 100 units casts 100 votes. Those unitholders who don't vote will have their units automatically counted as 'No' votes.

Neuberger Berman, a New York asset management firm that controls the second-largest number of votes, also seeks to block the merger. That company manages 9.6 percent of Cedar Fair's outstanding units and has full discretion on voting for 8.6 percent of Cedar Fair's units.

Raynor's spokesman, Tom Johnson, said Raynor sticks behind a news release that said he opposes the Apollo deal and considers Apollo's $11.50 per unit offer too low. "Cedar Fair has numerous options to unlock the value in its units, but has thus far chosen to take the path that creates the least value for all of its unitholders," the release said in part. "(Raynor's company) believes other large holders intend to vote against the proposed transaction and urges all holders to do the same."

Cedar Fair's units, which had been trading above $12 in recent days, closed Monday at $11.86.

A voting deadline hasn't been set yet on the proposed merger, but it apparently will be announced any day now. The voting dates and other new details concerning the merger proposal will be included when Cedar Fair files its final proxy statement and mails it to unitholders.

"We expect it to be filed sometime in the near future," said Stacy Frole, director of investor relations for Cedar Fair.

[Jew"It's not small, but it is very 'average.'"]

Looks like the "good old boys club" might soon be shutting down. There's no way the management team survives this mess if the deal doesn't go through.

[dannermanWhich came first the turtle or the donkey?]

Well I don't know about on a corporate level, but the past 2 years the "local management" at Dorney Park have been making a lot of poor decisions, and it shows in the final product. I and a lot of my friends who are season passholders and go on a regular basis have said the same thing - it's not as fun since there's a lot of "corporate atmosphere", the employees aren't allowed to actually have fun with the guests, and there have been a LOT of very good, guest-centric employees that have been there for years (and thus have a lot of good experience) and interact with regular repeat customers to keep them entertained, coming back, and spending money, who have been fired for very stupid reasons within days of the end of the season just so they don't have to pay out the seasonal bonus. As a result of that short-sightedness, those employees are not allowed to return to ANY Cedar Fair property (as employees), and what's left is a bunch of rookies who are just looking for a paycheck in a poor economy with no team-thinking or loyalty to the company whatsoever. The guests are the ones who suffer as a result.

If that shortsightedness permeates the corporate level, then there's no way this deal will go through because they won't be looking at the long term - only the short term (which looks to be making a quick buck before they get out of the game entirely - both on a management level and a unitholder level)

[ginzoWhy do I still have a donkey title???]

I find this situation very interesting. I'm not defending anyone here, but this illustrates the challenges of being a CEO.

Jerry Yang of Yahoo got skinned and eaten alive for rejecting Microsoft's buy out offer because he thought it was too low. Mr. Yang was almost certainly wrong in this perception, but it was his honest opinion.

Now Kinzel and Company are getting a beat down for going to the opposite way: Selling out too low.

[dannermanWhich came first the turtle or the donkey?]

I think this low sellout is because Kinzel & Co may be scared of the economy, and with a lot of people drawing parallels with Six Flags, they don't want to be around and/or publicly traded if things pan out similarly where the best option seems to be bankruptcy. Not to mention that I'm sure he stands to lose a LOT of money if the company does declare bankruptcy.

The other thing that I think really needs to be pointed out is that the company was trading just barely over $9 a share before this deal was announced. It immediately skyrocketed to over $11 (doesn't take a genius to figure THAT one out) and continued trading to the point where I was able to sell all my units for $13, and it actually got up to $13.56 before coming back down, and is still trading in the mid-$11 range.

To me, it looks like the value of the company went up about $2.50/unit as a result of this deal. Not a bad feat in the present economy, especially if there were people who WERE interested in getting out but didn't want to do so at $9/unit.

Add in the delay of the vote of this deal, maybe they are merely waiting until they get to a more favorable part of their yearly value roller-coaster when the seasonal parks start opening and hoping that if/when this deal falls through the unit price is that much higher. Although we hear reports and confirmations of large unitholders who vow to vote no, for all we know Kinzel et. al. will vote no with their own shares to reap the value increase the deal has apparently created.

Maybe I'm missing something here, but as I'm typing this, I'm starting to wonder if maybe this was an interesting move on their part to try to increase (or at least prevent decrease of) the value of the company over the winter inactive months with no intent to actually sell in the long run.

Edit: typo

[Jew"It's not small, but it is very 'average.'"]

I find this situation very interesting. I'm not defending anyone here, but this illustrates the challenges of being a CEO.

Jerry Yang of Yahoo got skinned and eaten alive for rejecting Microsoft's buy out offer because he thought it was too low. Mr. Yang was almost certainly wrong in this perception, but it was his honest opinion.

Now Kinzel and Company are getting a beat down for going to the opposite way: Selling out too low.

In this particular case, I see it as shareholders seeing right through the real intent of the buyout: to bail management out. They clearly have no idea how they are going to pay off the debt from buying Paramount Parks. Pulling the dividend was the backup plan, which would be fine if they had enough revenue to eventually restore it...but right now, they don't.