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Published: Tuesday, 3/9/2010

Cedar Fair weighed auction


Before agreeing to a $2.4 billion purchase offer by Apollo Global Management LLC, executives of Cedar Fair LP weighed the idea of putting the company up for bid at a competitive auction, the Sandusky amusement park chain revealed in a new regulatory filing.

Cedar Fair, which has asked its investors to support the Apollo deal at a special shareholders meeting March 16, rejected the auction idea after considering its cost and the risk that Apollo would not participate in the auction.

In an addendum to its proxy statement already filed with the U.S. Securities and Exchange Commission, Cedar Fair said its financial investors believed that an auction was unnecessary because any interested parties would approach the company later during a 40-day “go-shop” period that occurred after the Apollo deal was announced.

The shopping period, which ended in late January, allowed Cedar Fair to strike a deal with any buyer willing to top Apollo's deal. Several parties contacted Cedar Fair during the period, but none made a purchase offer.

In its filing, Cedar Fair also disclosed that as an alternative to the sale to Apollo, its board twice discussed making changes to its capital and corporate structure, refinancing or restructuring corporate debt, and other strategic options.

However, the board each time determined that the best course for its shareholders was to continue discussions with Apollo.

Many shareholders, including Cedar Fair's two largest, have come out against the Apollo deal. The largest shareholder — a pair of Texas-based investment funds, Q4 Funding and Q Funding III

— have argued Apollo's purchase offer of $11.50 a share is too low.

On Friday, an independent investment advisory firm, Egan-Jones Proxy Services, issued a report recommending shareholders vote for the sale to Apollo, concluding that it is the best way to maximize shareholder value.

Among its arguments, Egan-Jones said the $11.50 price is a 43 percent increase in share value compared to the value of Cedar Fair shares in the 30 days prior to the announcement of the Apollo deal.

It also said that the volatile economy and the near-term and long-term uncertainty about economic conditions nationally and within the amusement park industry favored approval.

Egan-Jones said that alternatives to the sale were less favorable and a defeat risks a harmful effect on the company's operations and its relationships with customers and suppliers.

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