Apollo Management Cedar Fair

Apollo Buys Cedar Fair Entertainment for $650m

Apollo Management LP has finally finished a deal–the firm’s first in two years–to purchase a theme park company for $650 million.  Apollo will also take on Cedar Fair Entertainment Co.’s $1.7 billion of debt.  Stockholders in the company will be compensated with a 28% premium on the stock’s closing price on Dec. 15.  After a rough patch, Apollo is back to making deals.

Looking at this deal, it suggests a high level of confidence in an economic recovery.  While other private equity firms are more inclined to invest in more recession proof industries like health care and energy, Apollo is taking on a business that relies on consumer spending.  If the economy takes another dip or the unemployment rate stays at its current level so that consumer spending doesn’t rise, Apollo could be holding onto another debt-heavy company that fails to produce profits.  In other words, it may have another Linens-N-Things.  But private equity firms look for firms on the cheap and Apollo may have got the price they want at the right time, when Cedar Fair-investors are nervous enough still to sell but the worst of the economic recession is behind us.  Just a side note: Six Flags (a theme park giant) filed for Chapter 11 in June of this year.

Here’s more from the Journal: 
Like many other companies reliant on consumer spending, Cedar Fair has seen its sales and profits fall. For the 12 months ended in September, Cedar Fair reported sales of $929 million, down from $992 million for the same period a year earlier. Net income tumbled to about $5 million from more than $50 million a year earlier. Cedar Fair shares slipped during 2009, dropping over 30% year-to-date compared with a 17% gain for the Dow Jones Industrial Average. The shares closed Wednesday at $9.08 each.

J.P. Morgan, Bank of America Merrill Lynch, Barclays Capital, and UBS advised Apollo and, along with KeyBanc Capital Markets, provided approximately $1.95 billion in financing for the deal. Rothschild Inc. and Guggenheim Securities advised Cedar Fair.

One of Cedar Fair’s rivals, Six Flags Inc., filed for Chapter 11 bankruptcy protection in June, citing looming debt obligations and shareholder payments. Cedar Fair also faces a wall of debt obligations, which led it to seek out a sale of some assets earlier in the year. Apollo’s expected purchase shows how those same debt markets have revived, allowing long-dormant private-equity firms to push back into deal-making. In November, private-equity firms General Atlantic and Kohlberg Kravis Roberts & Co. acquired the TASC consulting unit of Northrop Grumman Corp. for $1.65 billion, while TPG and Canada Pension Plan announced a $4 billion takeover of pharmaceutical data company IMS Health Inc.  Source

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Tags: private equity deals, apollo capital management lp, apollo management, cedar fair entertainment corporation, private equity purchase, buyout, sale.

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