Cedar Fair shareholders vote to split CEO, chairman positions
1/12/2011HURON, Ohio -- It was a thrill ride gone bad for Cedar Fair LP's board and management.
The Sandusky amusement park company's biggest shareholder rallied its counterparts Tuesday to pass a resolution to split the chief executive and chairman positions and the votes cast on a second issue of making dividends a higher priority than paying off its $1.6 billion debt were deemed too close to call. The company's board and management had opposed both proposals by Q Investments, a Texas hedge fund which owns 18 percent of Cedar Fair's 55 million shares.
The vigorous proxy fight both sides waged to garner votes from shareholders culminated in the 17-minute special shareholders meeting at a Bowling Green State University Firelands campus auditorium in Huron, Ohio.
"Unitholders have spoken," Q Investments representative Scott McCarty said in a statement after the meeting. "The question now is, will the company finally listen?"
Neither issue was binding on the Cedar Fair board, which met after the shareholder meeting.
The board's lead director, Michael Kwiatkowski, issued a statement: "We understand the concerns our unitholders have on Proposal #1 and intend to implement a policy in regard to the separation of the chairman and CEO roles in a prudent and appropriate manner. In regard to Proposal #2, we will evaluate and act accordingly once a final outcome of the vote has been determined."
Q Investments said afterward that it expects Dick Kinzel, Cedar Fair chairman and CEO, to step down quickly as chairman. There was no such indication, however, from Mr. Kinzel or the company. Mr. Kinzel has said he will retire in January, 2012.
Cedar Fair officials said they did not know how many votes overall had been cast or the vote totals on the two issues. Final results, which are being tabulated by independent auditor Proxy Services Corp., might not be available for a several days, company officials said.
Q Investments said, however, that it learned that 75 percent of the votes cast favored the dividends over debt issue, so it expected passage. In a statement, it called both vote outcomes "a resounding victory and a clear indication of what the unitholders want."
Shareholders overall had little reaction from the vote on the stock price. Cedar Fair's shares finished up 29 cents at $17.25 Tuesday on extremely light trading.
Experts said that it would be an uphill fight for Q Investments to garner a majority of shares -- nearly 28 million -- to pass each resolution.
It proposed the CEO/chairman split because it said it would bring another voice to the board with new ideas, and could mean the CEO could be an amusement park expert and the chairman more of a financial expert.
Q Investments had criticized Mr. Kinzel's financial decisions. The ballot issue also said that the company chairman could not be any officer of the company or a former board member, providing a true independence.
Cedar Fair's board opposed it, calling it too restrictive and insisting that Mr. Kinzel had done a good job.
Q Investments wanted to make paying higher dividends a bigger priority than reducing the company debt, maintaining that its financial situation should allow it to pay shareholders more than the 25 cents it paid late last year. Before it suspended its dividend last year after the failed takeover of the company by a New York private equity firm, Cedar Fair paid $1.92 a share annual dividend.
Cedar Fair's board opposed this issue, maintaining that its lender agreements didn't allow for bigger dividends and contending that reducing the debt was important for the long-term stability of the company.
The Texas mutual funds indicated they would wait to see how Cedar Fair responds before making its next move.
Mr. Kinzel said afterwards that the outcome was "pretty overwhelming" and not unusual given that there is a trend among companies to separate the two roles. "Certainly, I accept the vote of whatever the shareholders decided. If they think that's in the best interest going forward, well, I certainly accept that."
About 200 shareholders attended the special meeting. Shareholders asked several questions of company leaders after the meeting, and some of the queries and comments were contentious.
John Bossart, for example, asked why Cedar Fair executives got bonuses last year when the company didn't perform so well financially. Others complained about previous company problems, including the failed takeover a year ago by Apollo Global Management, an aborted deal that cost Cedar Fair $10 million to cancel.
Gene DaGiau, who voted against the two proposals, said the passage of one and closeness of the other "shows a lack of confidence" in management. "That was disappointing in a way," he said.
Mr. DaGiau added, "I'm not a spokesman for Dick Kinzel but I do think we owe him some respect. This little amusement park by the lake has become a national power."
Rick Munarriz, an analyst for the Motley Fool online investing site, said he was surprised that one proposal passed and the other is too close to call. "I definitely didn't see that kind of mandate coming. I didn't think Q Investments had that kind of influence," he said.
Contact Jon Chavez at: jchavez@theblade.com or 419-724-6128.