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SANDUSKY -- As Cedar Fair LP announced Tuesday it has terminated its takeover plan by a New York private equity firm, the Sandusky amusement park firm's biggest shareholder has proposed merging Cedar Fair with bankrupt Six Flags Inc.
Cedar Fair, which had supported its acquisition by Apollo Global Management, said Tuesday that deal is done and it has initiated a “poison pill” plan to ward off a hostile takeover.
Management said the plan would dilute Cedar Fair stock by giving existing shareholders the right to buy additional shares at a discounted price should any shareholder gain a total 20 percent of outstanding stock. The company called it a preventative measure that was not adopted in response to a specific effort to gain control of the firm.
But in a filing with the U.S. Securities and Exchange Commission, Q Funding III, one of a pair of Texas investment funds that together are Cedar Fair's largest shareholder at 18.1 percent, disclosed Tuesday that it has had conversations with the bondholders of bankruptcy amusement park chain Six Flags.
The conversations discussed the possibility of merging Six Flags with Cedar Fair. Q Funding said it had relayed that idea to Cedar Fair officials.
Jeff Thomison, an analyst with Hilliard Lyons Inc., said its possible the the “poison pill” plan and the Six Flags discussions could be related.
“But I've never entertained the idea that there could be some kind of transaction between Six Flags and Cedar Fair. …Although they're both amusement park companies, those two companies are not similar in any other respect.”
Mr. Thomison said it was “not a big surprise” that the merger with Apollo had been terminated.
Apollo and Cedar Fair in December announced the $2.4 billion takeover, giving shareholders $11.50 a share, plus absorbing the $1.6 billion debt of Cedar Fair. Q Funding and other shareholders objected to deal, contending the purchase price was too low.
The second largest shareholder, Neuberger Berman LLC, an independent asset management firm, owns 9.6 percent of the stock and opposed the deal. With Q Funding, the opponents forced the company to delay an earlier scheduled shareholder vote on the transaction.
In addition, the Knott's family, which founded Knott's Berry Farm amusement park in southern California and later sold it to Cedar Fair, was against the deal. The Knott's family held a 3.4 percent stake.
The deal could be scuttled by 34 percent of shareholders objecting, and the those big shareholders who opposed it owned more than 30 percent.
Mr. Thomison said the deal perhaps could have been saved if Apollo had come back with a higher per-share purchase offer.
With the deal being canceled, Cedar Fair is obligated under the purchase agreement to pay Apollo $6.5 million to reimburse it for its expenses incurred during the transaction. Also, both sides have released each other from all obligations associated or any legal claims arising from the deal.
A special shareholder meeting set for Thursday to vote on the matter has been cancelled. Instead, Cedar Fair said it will now hold its annual meeting on June 7.
Dick Kinzel, chairman, president and chief executive officer of the Company, said in a statement: “The Board has heard from Cedar Fair (shareholders) and it is apparent that the merger transaction does not have the required level of investor support.
“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.”