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11/03/23 By Xavier Hamilton
Cedar Fair and Six Flags Entertainment Corporation, two giants in the amusement park industry, have made a groundbreaking announcement. They are set to merge, creating a combined company that will redefine the amusement park experience. This strategic move brings together 42 iconic parks and 9 resort properties, providing a more balanced presence across various climates. With a strong financial profile and the potential for $200 million in annual synergies, this merger is expected to drive innovation, enhance guest experiences, and benefit shareholders.
Combining Strengths for a New Era
The merger agreement, approved unanimously by both companies' Boards of Directors, is a significant step towards creating a leading amusement park operator with a pro forma enterprise value of approximately $8 billion. Cedar Fair unitholders and Six Flags shareholders will own 51.2% and 48.8%, respectively, of the combined company's fully diluted share capital. The transaction also includes a special cash dividend for Six Flags shareholders, contingent on the closing of the merger.
Diversified Geographic Footprint
One of the key advantages of this merger is the diversified geographic footprint it offers. Cedar Fair and Six Flags have minimal market overlap, ensuring that the combined company can mitigate the impact of seasonality and reduce earnings volatility. This diversified presence provides guests with year-round entertainment options, further enhancing their experiences.
Proven Leadership and Cost Savings
The leadership teams of Six Flags and Cedar Fair bring complementary skillsets and experience to the combined company, promising effective integration and the achievement of synergy targets. The merger is expected to generate annual synergies of approximately $200 million, with $120 million attributed to identified administrative and operational cost savings within two years following the transaction. The companies also anticipate $80 million of incremental EBITDA within three years of the merger.
Improved Operating Platform
By uniting their complementary operating capabilities, the combined company is poised to create a more robust operating model that enhances park offerings and improves systemwide performance. This merger is also expected to offer expanded park access to season pass holders and an enhanced, combined loyalty program.
Strong Financial Profile and Flexibility
With a pro forma revenue of $3.4 billion, $1.2 billion in Adjusted EBITDA, and $826 million in free cash flow, the merged company is expected to be accretive to earnings per share within the first 12 months. The combined company will have a pro forma leverage ratio of approximately 3.7x net debt to Adjusted EBITDA, inclusive of synergies, with plans to reduce it to approximately 3.0x within two years of the merger. This enhanced financial profile will provide the company with greater flexibility to invest in park upgrades, new attractions, food and beverage selections, and enhanced guest services.
Leadership and Corporate Governance
The combined company will be led by a proven management team, with Richard Zimmerman serving as President and Chief Executive Officer, and Selim Bassoul as Executive Chairman of the Board of Directors. With a combination of directors from Cedar Fair and Six Flags, the newly formed Board of Directors will provide a balanced perspective on the company's strategic direction.
The merger of Cedar Fair and Six Flags promises to usher in a new era for the amusement park industry. With a diverse and extensive portfolio, improved guest experiences, and strong financial capabilities, the combined company is well-positioned to redefine the amusement park experience for guests, shareholders, employees, and other stakeholders. The merger is expected to close in the first half of 2024, pending regulatory approvals and shareholder consent, setting the stage for an exciting future in the world of entertainment.
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