Both Six Flags and Cedar Fair have debt that isn't insignificant and it's all going to be rolled up. "Taking on" wasn't the best use of words but there's a good amount of debt between the two.
News Cedar Fair Merges with Six Flags
- Thread starter horsesboy
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Debt isn’t necessary bad for a company though — pretty much every major company has debt. There are financial benefits to companies for holding debt. For example, Amazon has a whopping $140 billion in debt.
Cedar Fair’s debt-equity ratio is about 4 and Six Flags’s is about 2.5, which appears generally on par with the industry. SEAS’s is about 7, for comparison. (Across all industries, 2 is generally considered a “healthy” ratio, but fixed-asset industries typically have a higher ratio.) For fixed-asset businesses like theme parks, that amount of debt isn’t particularly unusual.
More to your point though, the combination of the two companies’ existing debts shouldn’t significantly contribute new financial headaches or obligations — at least not beyond what the companies had to deal with prior to the merger.
I don’t disagree that there are other potential issues with this merger, but I don’t think a sudden accumulation of debt is one of the big ones.
Debt will not be the issue with this merger, no. It's something that can easily be remedied by selling properties as @Zachary alluded to earlier. The bigger financial issue for the new Six Flags will be maintaining its margins compared to the previous Six Flags and Cedar Fair, as Premier Parks era Six Flags learned that the more properties you're in charge of as an entity the lower your margins get due to increases in cost. Both Six Flags and Cedar Fair already had quite a few parks that weren't that great at making money compared to their flagships, and the situation looks very similar to what Premier Parks was going through in the early-mid 2000s where the number of lower-to-zero margin parks was significantly impacting the company.
I don’t always use written word the best because of a learning disability. But @b.mac summized my thoughts a little better. It’s companies that have struggles at times coming together to create something bigger. The new Six Flags/FUN entity is now dealing with everything at twice the size it used to.
I mostly feel bad for the people about to be laid off.
That’s going to be a mess. All the top level execs seem to be falling up. The redundant department heads are going to be consolidated.
Will want to watch the park presidents/chefs/and like roles. I wonder if any would leave out of not wanting to work for the new company.
Not to be argumentative, but is there a source you’re referencing that you could share? Asking because in the investor call, it seemed like one of the main reasons highlighted for the merger was hundreds of millions in cost savings by eliminating redundancies and strengthening the supply chain — which seems like the opposite of what you’re saying.
I'm not sure how this merger makes sense. Both companies have a fair amount of debt. I could understand CF wanting to purchase SEAS but the Six Flags parks are a bit of a mess (SEAS parks being in relatively good shape). With high interest rates, funding for the merger and cleaning up the SF parks seems a bit of a gamble. Plus we're looking at a possible recession.
The problem with closing the parks and selling the land is you're selling the land effectively as undeveloped but with utilities in place. And look what happened to land where parks were closed. Not to mention the commercial property market is over saturated. It might make sense to close SF America since the land in MD is fairly pricey but who the hell would buy the land KD is sitting on.
It'd be interesting to figure out what the thought process is behind this merger.
The problem with closing the parks and selling the land is you're selling the land effectively as undeveloped but with utilities in place. And look what happened to land where parks were closed. Not to mention the commercial property market is over saturated. It might make sense to close SF America since the land in MD is fairly pricey but who the hell would buy the land KD is sitting on.
It'd be interesting to figure out what the thought process is behind this merger.
No source but it's always something mentioned whenever companies have mergers or buyouts like this. There's never really been any cost savings through eliminating redundancies or streamlining any processes for both businesses involved. The only time you legitimately see cost savings is when the buyer is stripping the purchased entity of everything that isn't bolted down, usually for resale at a later date for more cash liquidity.
Good thing the rides are bolted down then.
My main prediction that we'll soon be noticing is more ride hardware of the "maintenance heavy" variety will begin to bite the dust more than we've already seen. This has been a Cedar Fair strategy for a while now and although Six Flags has a pretty decent collection of aging attractions throughout their parks, I do feel like the new combined board will see them as extra expenses. Obviously notable attractions that are still seeing decent crowds should be okay but other aging rides might be shown the door sooner rather than later.
Unfortunately, I don’t believe Cedar Fair stock is a good investment. Their attendance is declining and they are only maintaining their profit by cutting costs. Cost-cutting ends up producing more of an attendance decline. It’s not a good business plan. Additionally, they depend on perfect weather for attendance. That’s not a good business plan either.
Honestly I am not sure this deal isn't a good thing for SEAS. This merger will likely lead to less capital spending by the combined company meaning fewer new rides to compete for attention with SEAS yearly new ride plan. We likely will see a significant rise in ticket and pass prices which will help with the image that SEAS parks are over priced. Honestly there are probably a few other plusses to the deal from SEAS prospective.
Anybody else have the deflating moment where you tell one of your non-enthusiast friends/family members about the news and they respond with "what's Cedar Fair?"
This is exactly why they took the name. Even on Cedar Point fan-pages on Facebook, people are going "Six Flags Bought the Cedar Point Company!?" "Six Flags finally won?!" And even if you explain what's actually happening, the optics are too pro-SF. It's probably one of the reasons SF even went along with it, despite the likelihood that many of their execs won't be there within a few years thanks to superior footing and maneuvering by Cedar Fair's execs.
Yeah it seems like most of Six Flags upper management isn’t going to have the best Christmas.
I'm sure they will end up with a pretty payday and do a heck of a lot better than most. I certainly wouldn't worry about any of the top dogs in this merger.
I hope they keep the Six Flags app team on (or keep contracting it to the same firm). There are a lot of things to not like about current Six Flags, but they have the best app in the entire industry in my experience.
I will say I agree with that I consistently use the six flags app much more frequently than the other chains apps when I’m inside the parks.