Analysts Splash Water On Six Flags, Cedar Fair Theme Park Merger Idea

October 3, 2019

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Courtesy of Benzinga

Analysts Splash Water On Six Flags, Cedar Fair Theme Park Merger Idea

Investors in two large American theme park operators may be in for an interesting ride.

Sell-side analysts are expressing doubts about the wisdom of a reported effort by Six Flags Entertainment Corp (NYSE: SIX) to seek a merger with Cedar Fair, L.P (NYSE: FUN).

The Report

Reuters said Wednesday that Six Flags is seeking the merger in a bid to expand its size and ticket pricing power, though with the caveat that there’s no certainty the cash-and-stock deal will be reached.

Six Flags, already the world’s largest regional theme park company, saw its shares drop Wednesday after the report, while Cedar Fair stock rose.

The Reaction

“We believe the combination is a stretch,” Wells Fargo analyst Timothy Conder said in response to the report.

KeyBanc Capital Markets’ Brett Andress said: “We tag this at much less than a 50% probability and do see more investor risk vs. reward should this deal happen.”

Both analysts cited perceived “cultural differences” between the two companies, with Andress also failing to find a true geographic effect that would drive additional value to customers.

While Six Flags is the industry giant, Cedar Fair is a bit smaller, with 11 amusement parks, three water parks and four hotels, all in the United States.

CEO Transition

Another question for both analysts: why pursue a major M&A move as Six Flags is preparing for the retirement of CEO Jim Reid¬Anderson early next year and undertaking search for a replacement?

Also, the merger strategy in the industry so far has been different. Andress said both Six Flags and Cedar Fair have posted respectable results this year.

That is “one argument against the need for further consolidation, as SIX and FUN remain the acquirers of choice among smaller operators,” the analyst said in a Wednesday note.