A shot was fired today in the amusement park world which could shake up the industry. According to Bloomberg SeaWorld has offered to pay approximately $3.4 BILLION to buy Cedar Fair, owner of 17 parks including Knott’s Berry Farm and Cedar Point.
The $60 per share offer is not a sure thing, but has caused both companies stocks to rise in trading today. Cedar Fair’s stock shot up 10% on the news causing trading to be briefly paused (daily chart on the left and last year on the right):
SeaWorld’s rise was much smaller, but the markets still seem positive on the idea (daily chart on the left and year on the right):
The move does show that the industry has recovered quickly from the devastating effects of theme park closures in 2020. SeaWorld and other parks are seeing huge profits in recent quarters due to a strong rebound in attendance, higher prices, and lowered costs (as staffing, entertainment, and other services are slow to be restored).
Even if SeaWorld isn’t able to acquire Cedar Fair, the move could spark a bidding war or momentum for other companies in the industry to consolidate or sell off strategic assets to other companies. The privately held Herschend Family Entertainment, owners of Silver Dollar City and DollyWood, might have interest in some of Cedar Fair’s assets, such as Knott’s Berry Farm. Six Flags operates parks which closely mirror many properties in the Cedar Fair inventory.
Even SeaWorld could find itself the target of a takeover attempt as the brand continues to suffer the ire of social media even as they achieved record profits in the last quarter. Another brand could take over the SeaWorld parks and infrastructure and rebrand, removing the problematic large cetaceans in small enclosures and selling off less profitable assets.
Where will SeaWorld’s big move ultimately end up? That remains to be seen. But Cedar Fair may do as other companies (including Disney and Six Flags) have done under similar circumstances in the past and adopt a “Poison Pill” strategy. A poison pill is a defense tactic employed to thwart hostile takeover attempts. Or, the board and shareholders may decide they like the SeaWorld offer or even entertain competing offers to make the largest return on their shares as possible. These are unprecedented times and there’s no telling what shareholders may be willing to do under the circumstances.
It’s also possible that Cedar Fair may disrupt the entire situation by making a bid for SeaWorld. In 2019, the last normal year before park disruptions and shutdowns, Cedar Fair had a larger net income and total assets:
- SeaWorld 2019: Net Income $89.5 million with total assets of $2.3 billion
- Cedar Fair 2019: Net Income $172.3 million with total assets of $2.6 billion
Well folks, what do you make of the situation? Should Cedar Fair sell? Use complicated shareholder strategies to rebuff the attempt? Or should they go on the offensive and make a big acquisition, and of whom? And what other companies in the industry do you think might become potential takeover targets? We look forward to hearing your thoughts below!
