The proposed takeover of theme park operator Cedar Fair by asset manager Apollo Management LP has collapsed due to a lack of shareholder support.
The breakdown of the deal will cost Cedar Fair $6.5 million, which it must pay to Apollo to cover expenses incurred in setting up the failed takeover. The news that the agreement between the two parties has been terminated was not unexpected, with Cedar Fair shareholder groups having voiced concerns that Apollo's $635 million offer for the company was too low.
The deal would have seen Apollo taking control of Cedar Fair's 11 theme parks and 7 water parks - including Knott's Berry Farm, Kings Island, Cedar Point, Carowinds and Kings Dominion. The firm would also have taken on Cedar Fairs $1.7 billion of debt, bringing the total cost of the deal to around $2.4 billion.
Rumors had circulated that Apollo was set to increase its initial offer of $11.50 a share, which was approved by the Cedar Fair board but not ratified by its shareholders, to $13.50 a share. However, Cedar Fair's largest shareholder with 18.1% of shares, Q Investments, had said it would oppose the sale even at the higher price. Cedar Fair's shares are currently trading at around $12.30, having dipped to $11.21 earlier today.
The impact of the takeover deal's collapse on visitors to Cedar Fair parks is not yet clear. The company has long been constrained by its heavy debt burden, but has continued to invest heavily in new rides for the 2010 season. Carowinds spent $23 million on its Intimidator rollercoaster, Kings Dominion has invested $25 million in sister coaster Intimidator 305, and flagship park Cedar Point is installing water ride Shoot the Rapids at a cost of $10.5 million.
In the short term, the $6.5 million in fees that Cedar Fair must pay will divert funds that might otherwise have been spent on new attractions or upgrades. The deal's termination will also end speculation (denied by Six Flags) that Apollo could take over both Cedar Fair and rival Six Flags, and merge the two. However, rumors persist that a merger independent of any Apollo takeover could be on the cards in future - with Q Investments claiming to have been approached about a potential deal by Six Flags bondholders.
Dick Kinzel, CEO and chairman of Cedar Fair, put a positive spin on the end of the takeover deal in a statement on Tuesday, saying: "We are honored and excited by the opportunity to continue to manage and operate Cedar Fair as a public company and to provide our guests with an outstanding experience."
Cedar Fair struggled throughout 2009, suffering a 6% decrease in attendances compared to the previous year. This led some observers to question the firm's financial security, with a column on investment site The Motley Fool drawing parallels between Cedar Fair and Six Flags (which filed for bankruptcy protection in June 2009).