Article published February 03, 2010 Cedar Fair sale looking iffy 2 big stockholders opposed; price questioned by analysts By JON CHAVEZ BLADE BUSINESS WRITER
Chances to complete the $2.4 billion sale of Cedar Fair LP to Apollo Global Management LLC have grown dimmer, given the delay in scheduling a shareholder vote and with two big stockholders now opposing the deal.
"I think the market is showing that the deal is not going to go through at this point," said Robert Routh, a Denver equity analyst with Wedge Partners Corp. One possibility, he said, is for the New York private equity firm Apollo to offer a higher bid to entice stockholders to favor the transaction.
The deal, announced Dec. 17, calls for Apollo to assume Cedar Fair's $1.6 billion debt load and pay its shareholders $11.50 a share.
But with shares trading over $12 since Jan. 20 and daily trading volume exceeding 1 million shares 10 times since the purchase of the Sandusky amusement park company was announced, Mr. Routh said, "it leads you to the conclusion that all the institutional investors are not selling their stock, which clearly means the price per share is too low and can be renegotiated.
"Because if not, the institutional investors wouldn't be waiting for the deal to close. They'd sell now."
The second-largest investor in Cedar Fair, mutual fund Neuberger Berman Group LLC, disclosed yesterday in filings with the U.S. Securities and Exchange Commission that it has purchased more shares - or "partnership units" - of Cedar Fair, raising its total investment to 9.6 percent from a previous 8.8 percent.
Neuberger stated it will vote against the Apollo acquisition, joining hedge fund Q Funding III, which is on record against the deal and controls 12 percent of Cedar Fair shares.
Stacy Frole, Cedar Fair's director of investor relations, said the company maintains regular contact with Neuberger, which has been an institutional shareholder for several years.
"We'll continue to reach out to our investors, both institutional and retail, to answer any questions and explain things," she said. "We still support the deal with Apollo at $11.50, which is a premium to what our units were trading at the day before the transaction."
On Dec. 16, Cedar Fair shares closed at $9.06 on the New York Stock Exchange. Yesterday they closed at $12.19, down 8 cents.
Cedar Fair owns 11 amusement parks, including Cedar Point in Sandusky, and six water parks in the United States and Canada.
A "no" vote by 34 percent of the company's 55.2 million outstanding shares would kill the deal. The two big stockholders who oppose the deal hold 21 percent.
With Cedar Fair shares being owned by many small investors, many of whom are upset by the deal's $11.50 share price, the prospects of passage are in jeopardy, Mr. Routh said.
"If most investors felt the deal was going to go through at $11.50 it would be trading at that price or less. But it's around $12.25," he added.
Mr. Routh said he thinks there "a fairly good chance" Apollo may renegotiate the $11.50 price before a vote on the deal occurs. But how much higher it would go and when it might step in - if at all - are the big questions, he said.
Steven Davidoff, a mergers expert, former corporate lawyer for Shearman & Sterling, and a law professor at the University of Connecticut, has been tracking the Cedar Fair-Apollo deal.
The transaction is "clearly on the ropes," he said. And if the deal is voted down and Apollo walks away from the deal, it could be harmful for Cedar Fair's management.
There would be "a real issue with the current management that got you into this problem," Mr. Davidoff said. "At that point, you have the issue of what do you do? Do you replace them? Do you incentivize them? … It's something the [Cedar Fair] board really would have to think about."
Mr. Davidoff said the biggest unknown is what happens if Apollo doesn't sweeten the deal, it is defeated, and Apollo walks away.
"They may decide … they don't want to get into a bidding war with themselves. They may want to come back in a year and buy Cedar Fair at an even lower price, or they may just walk away."
Contact Jon Chavez at: jchavez@theblade.com or 419-724-6128. Permanent LinkCedar Fair sale looking iffyhttp://www.toledoblade.com/apps/pbcs.dll/article?AID=/20100203/BUSINESS03/2030358/-1/BUSINESSSTORY:20102030358
Copyright 2010 The Blade. By using this service, you accept the terms of our privacy statement and our visitor agreement. Please read them. The Toledo Blade Company, 541 N. Superior St., Toledo, OH 43660, (419) 724-6000 To contact a specificdepartment or an individual person, click here. The Toledo Times ®
Search
advertisement
