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Can SeaWorld Entertainment buy Cedar Fair and more importantly…should it?

Opinion
Aquatica Orlando

By Lance HartScreamscape   

Last week, SeaWorld Entertainment made an offer to buy Cedar Fair.

Cedar Fair is currently doing its due diligence to properly analyze the offer, determining if the $3.4 billion cash offer is the best course of action for the company and its investors, so it has not given an answer yet. However, a couple of other items may be at play that may affect this offer. 

Cedar Fair’s stock price

Cedar Fair’s stock price (FUN on the NYSE) has jumped by quite a bit since the offer was made. Prior to this, its stock price was sitting between $48 – 49 a share. But in the days that followed, the price increased. On Friday, it reached almost $59 a share.

This is the highest FUN’s stock price has been since the pandemic started. Yet the company’s pre-pandemic stock price was usually around $65-70 a share, although it was around the $55-60 range in late 2018 through to the start of the pandemic, when it plunged.

cedar fair
California’s Great America

My feeling is that Cedar Fair’s stock price has been mostly undervalued for the past year after the chain stumbled a bit during the 2021 season. Being the last of the theme park chains to reopen parks resulted in it also being the biggest chain to suffer from the staffing shortage.

Several parks were unable to operate 7-days a week in the busy 2021 summer season, following 2020 where several parks failed to open at all. So, the result of Cedar Fair’s reaction speed in dealing with pandemic issues has indeed caused a less than stellar performance at its theme parks.

A change in fortune

By contrast, SEAS stock price has historically been quite low. It was initially hammered by the Blackfish fiasco, shortly after its IPO in 2013. The company’s stock spent most of those years in the sub $20 range per share.

Improvements saw it rise from late 2018 to early 2020. Then it dropped, like everyone else, at the start of the pandemic. Yet, unlike Cedar Fair, SeaWorld’s stock price managed to slowly rise throughout 2020 and rose to all-time highs during 2021. It has sat mostly between the $55-65 range over the last six months. 

Steel Vengeance Cedar Fair
Steel Vengeance – Cedar Point

Taking into consideration Cedar Fair’s current rise in price to a more reasonable level, the consensus is that while Cedar Fair may consider the purchase offer from SeaWorld, SEAS is going to have to increase its offer a bit before Cedar Fair will be willing to accept it.

In fact, depending on how Cedar Fair’s balance sheets are these days, I wouldn’t be surprised if it surprises everyone with the counter-offer to purchase SEAS instead. 

Staffing issues

My gut instinct is that I just don’t see the two chains merging. Back in 2019, Cedar Fair turned down a $4 billion purchase offer from Six Flags. At the time that was mostly a stock offer, as opposed to SeaWorld’s current cash offer.

The world was a different place in 2019, before the pandemic shook everything up. But over the same time period, SeaWorld Entertainment has also been in the news often, over the fact that the company’s CEO office has been something of a revolving door.

SeaWorld’s board has hired CEO after CEO, with many departing after only serving a few months in the office. The past two CEOs have cited disagreements with the board of directors and chairman Scott Ross as the reason for their quick departures.

seaworld orlando seaworld to buy cedar fair
SeaWorld Orlando

Serge Rivera resigned in Spring 2020 after just five months on the job. He was the eighth CEO to try to lead the company since 2013. Rivera replaced Gus Antorcha who only served for seven months before walking out the door. Following the departure of Rivera, the CEO position was filled by Marc Swanson who has held the office ever since.

In addition to high turnover in the CEO office, several other top positions in the corporate office, as well as in the parks themselves, have seen other longtime staffers depart the company. This includes a large number of park VP’s and general managers. Many of whom had been with the parks since the Busch Entertainment days.

Clearly, there are some behind-the-scenes issues going on within SeaWorld Entertainment. This needs to be worked out before it tries to expand its chain of parks to a size that it has never had to deal with before.

The departure of so many members of upper management, along with their years of experience, does not inspire confidence in the kind of turmoil that could potentially take place as SeaWorld  Entertainment attempts to take control of the Cedar Fair chain.

SeaWorld to buy Cedar Fair?

Six Flags has been very quiet over the past week. This has led some to wonder if Six Flags may be assessing its own financial state right now, in order to determine if it could issue its own counter-offer to buy Cedar Fair – or even SeaWorld Entertainment. 

Six Flags Discovery Kingdom Sidewinder Safari
Six Flags Discovery Kingdom – Sidewinder Safari

These kinds of massive mergers are complicated. And when it comes to mixing Cedar Fair and Six Flags, I think they share too many markets for a deal to work.

SeaWorld, on the other hand, has fewer parks. Plus, for the most part, these exist in markets that would complement either Six Flags or Cedar Fair. This is especially true in Florida. Here, the company has five parks in a market where neither Six Flags nor Cedar Fair currently operates. 

A challenging few years

The past two years have not been kind to any of the theme park chains. They are all struggling in different ways. However, some have managed to find their way through the fog far more successfully than others.

For the most part, we watched the SeaWorld Entertainment parks tread water for the past two years. It made no major forward moves, but neither did it seem to stumble along the way. Prior to COVID, the company was ready to launch five major new roller coasters in 2020. While it managed to open one in Texas before the parks shut down, it opted to delay the opening of the other four until 2021 at first, and again delayed them all until 2022.

emperor seaworld san diego seaworld to buy cedar fair
Emperor – SeaWorld San Diego

The park’s fans and passholders in each market criticized this move. For the passholders, the anger makes sense. They were buying season passes to enjoy a new attraction that failed to open.

But clearly, SeaWorld’s strategy was to play the long game here. And it appears that the move has paid off for the company thus far, in terms of gaining the favour of its investors once again.

Nothing to lose?

SeaWorld will open four major new roller coasters at four different parks across the US over the next five weeks. This alone will keep the company in the media spotlight just in time for the anticipated Spring Break crowds to arrive, followed by expected high crowd levels for the Summer season.

Sesame Place San Diego

Plus, the chain will also be launching an all-new theme park, Sesame Place San Diego, before the summer as well. If all goes well, the 2022 season will go down as a string of major hits for the SeaWorld Entertainment chain. This should impress investors and help to keep the stock price high.

With that in mind, the offer to buy Cedar Fair may simply be a show of strength for SeaWorld. After all, SEAS has little to lose. If Cedar Fair accepts the deal, then the SeaWorld Entertainment chain of parks will grow to new levels. If Cedar Fair turns it down, then SeaWorld Entertainment can walk away without losing face.

No matter how this plays out, it is going to be a bit of a wild ride, so stay tuned.

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Lance Hart

Lance Hart

Lance has been running Screamscape for nearly 20 years. Married and a father to three roller coaster loving kids, he worked for SeaWorld (San Diego and Orlando) in Operations and Entertainment for 19 years.

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