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Cedar Fair Seeks Buyout That Would Keep Bosses

New York Post

Original Article »

July 09, 2007

July 9, 2007 -- Cedar Fair Entertainment Co., the nation's third-largest theme-park operator, has quietly reached out to private equity firms to gauge their interest in a buyout on the condition that the company's management team remains in place, The Post has learned.

According to two sources close to the situation, Cedar Fair has tapped Bear Stearns to conduct a small, highly targeted auction for the company.

A spokeswoman for Cedar Fair declined to comment and calls to bankers at Bear Stearns were not returned.

Among those contacted by Bear Stearns are Apollo Management and Thomas H. Lee Partners. Bear also reached out to a potential European suitor, according to one source.

Others include Providence Equity Partners, Texas Pacific Group and the Carlyle Group - all of which either reviewed or were actively involved in the recent auctions for Six Flags and Paramount Parks - as well as the Blackstone Group, which owns Merlin Entertainment Group, home to Legolands parks and most recently, Madame Tussauds wax museums.

So far, however, interest among the buyer pool has been tepid, according to one source.

The problem is the ticket to ride won't come cheap, sources said. The company, which has a market capitalization of $1.5 billion and $1.8 billion in debt, is projected to generate about $330 million in cash flow this year. A 10 times cash-flow multiple typical of theme-park deals would equate to a price tag of $3.3 billion, and an 11 times multiple to just under $4 billion.

Sandusky, Ohio-based Cedar Fair owns 12 amusement parks, six water parks and six hotels, including Knott's Berry Farm in California and Star Trek: The Experience in Las Vegas. Only Disney and Six Flags are bigger players in the theme-park world.

Cedar Fair essentially doubled its size when it beat out many of the same private equity firms it is now courting to acquire Paramount Parks from CBS in a $1.24 billion cash deal last year.

That deal - in which Bear Stearns also served as financial adviser - appears to have re-energized Cedar Fair CEO Richard Kinzel, 66, who has signed a new contract to stay at the controls until 2012. His $1.2 million annual salary includes financial incentives related to the company's performance.

Kinzel's desire to remain on board after a sale is no doubt fueled in part by the wave of leveraged buyouts with terms that not only kept managers in place but signed them to lucrative contracts with equity stakes.

Cedar Fair stock rose 30 cents Friday to $28.84 in New York Stock Exchange composite trading. The shares are up 19 percent during the year-earlier period.

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