In a significant move within the leisure industry, amusement park operators Cedar Fair (NYSE:FUN) and Six Flags (NYSE:SIX) announced their merger on Friday, forming what is touted as the "world's largest regional theme park company". The merged entity, valued at approximately $8 billion, will be owned 51.2% by Cedar Fair unitholders and 48.8% by Six Flags shareholders. The deal is set to close by the first half of 2024.
The merger has led to a decline in the trading of Cedar Fair (NYSE:FUN) shares. Despite this, the combined company aims to generate pro forma revenue of $3.4 billion, Adjusted EBITDA of $1.2 billion, and free cash flow of $826 million. The move targets $200 million in annual synergies and anticipates an incremental EBITDA of $80 million and run rate cost savings of $120 million due to revenue uplift.
The CEOs of both companies, Richard Zimmerman (Cedar Fair) and Selim Bassoul (Six Flags), have endorsed the merger, which promises a strong revenue and cash flow generation profile. According to the terms of the deal, Cedar Fair stockholders will receive one share per unit owned while Six Flags shareholders will get 0.5800 shares per share owned.
The new entity will operate under the name Six Flags on the NYSE with ticker symbol FUN. It will be headquartered in Charlotte with significant operations in Sandusky and will control 27 amusement parks, 15 water parks, and 9 resorts across North America.
Despite a less than 1% decline in net revenues for the five-week period ending October 29 and a year-to-date drop of over 12% in FUN stock, analysts maintain a positive outlook with seven Buys and one Hold consensus rating.
Cedar Fair recently reported its Q3 results, with an adjusted EBITDA of $388 million and revenues of $842 million, exceeding the expected $824.2 million. It also announced a cash distribution of $0.30 per LP unit payable on December 20 to unitholders as of December 6.
Interestingly, the merger does not require approval by Cedar Fair unit holders and is set for completion in H1 2024. The new entity, which entertained 48 million guests last year, will form a new 12-member board post-merger.
InvestingPro Insights
Given the recent merger of Cedar Fair and Six Flags, it's crucial to understand the financial health and future prospects of these companies. InvestingPro provides valuable insights to guide your investment decisions.
For Cedar Fair (FUN), InvestingPro Tips highlight that the management has been aggressively buying back shares, indicating their confidence in the company's future. Additionally, the company has been consistently increasing earnings per share, a positive sign for potential investors. However, it's also important to note that 4 analysts have revised their earnings downwards for the upcoming period.
Looking at the InvestingPro Data, Cedar Fair has a P/E ratio of 7.39 as of Q2 2023, suggesting it's trading at a relatively low earnings multiple. The company's revenue over the last twelve months as of Q2 2023 was $1,794.59M, with a growth rate of 4.78%.
As for Six Flags (SIX), InvestingPro Tips indicate that strong earnings should allow management to continue dividend payments. The stock has also seen a significant return over the last week. However, it's important to be aware that the stock price movements are quite volatile.
InvestingPro Data for Six Flags reveals a P/E ratio of 23.33 and a P/E ratio (adjusted) of 15.32 as of Q2 2023. The company's revenue over the last twelve months as of Q2 2023 was $1,370.6M, with a decline in growth rate of -10.34%.
These insights are just a glimpse of the wealth of information available on InvestingPro. For a comprehensive understanding of these companies and many others, consider exploring InvestingPro's full list of tips and data. With InvestingPro, you can make more informed decisions in your investment journey.
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