A real 'millennium force'
5/26/2006SPONGEBOB SquarePants just got Mickey Mouse's attention.
Cedar Fair LP, owners of Cedar Point in Sandusky, one of the most popular amusement parks on the planet, is about to become one of the biggest operators as well. Cedar Fair will spend $1.24 billion - yes, that's billion with a "b" - to acquire the five amusement parks of rival Paramount Parks Inc.
The deal includes licensing rights to Paramount's Nickelodeon cartoon characters, including SpongeBob himself, Dora the Explorer, Blue's Clues, and Fairly OddParents, characters likely to appeal more to today's generation of youngsters than Snoopy and other Peanuts characters that stroll Cedar Point's midway.
More important, once the purchase is complete it will vault Cedar Fair overnight from the fifth largest amusement-park operator in the world to third, trailing just Disney and Six Flags.
The deal is strategically significant for reasons other than size.
As successful as Cedar Point has been - it's routinely voted the best amusement park in the world and offers more roller coasters than any other - the knock on the place is the seasonal limitations imposed by the weather.
Cedar Point has essentially five months to generate nearly all of its annual revenues. Except for Cedar Fair's Knott's Berry Farm in Buena Park, Calif., the same is true for its other amusement parks. However, adding Paramount's five parks will add two warm weather parks in Santa Clara, Calif., and Charlotte, N.C. Four of the five new acquisitions, in fact, have longer operating seasons than Cedar Point.
Cedar Fair also will go "global" for the first time: Canada's Wonderland park in Toronto is part of the package.
Closer to home, the deal gives Cedar Fair an Ohio monopoly. It acquired Geauga Lake and Wildwater Kingdom in Aurora in 2004, and its purchase of Paramount includes King's Island amusement park just north of Cincinnati.
There is speculation that Cedar Fair will be tempted to move its corporate headquarters out of Sandusky, and Richard Kinzel, chairman and chief executive officer, acknowledges that such a relocation will be studied, most likely to a new facility built by Paramount in Charlotte.
That would be unfortunate, and it would cost Erie County some jobs. If it happens, we would hope Cedar Point doesn't suffer the effects of a loss of company focus.
The park is an economic colossus for the Sandusky and North Coast region, drawing visitors from all over the East and midwestern United States. Of all the parks Cedar Fair owns - the seven it has now and the five it soon will - only Knott's Berry Farm, open all year, draws more people annually: 3.6 million visitors to Cedar Point's 3.5 million.
Like many business deals, this one carries high risk. Cedar Fair is assuming an enormous amount of debt - as much as $1.8 bilion to cover the deal - at a time when steadily rising admission prices have affected attendance, a problem Cedar Point has laudably done something about for its 2006 season.
On balance, however, the purchase has an enormous upside for Cedar Fair and should strengthen the company as a major player in the wild roller-coaster ride that is the family entertainment business.