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Chase Against Post-Pandemic Recovery: Unification of Amusement Park Giants Cedar Fair and Six Flags

On November 2nd, U.S. amusement park operators Cedar Fair and Six Flags announced an $8 billion merger to create a combined company with 27 amusement parks, 15 water parks, and nine resort properties in the U.S., Canada, and Mexico. After the merger, Cedar Fair shareholders will own 51.2% of the company and Six Flags shareholders will own the remainder. This is an all-stock deal, with each Six Flags share worth 0.58 share of the combined company, and Cedar Fair share worth 1 share of the combined company. Perella Weinberg Partners is serving as the exclusive financial advisor to Cedar Fair and Goldman Sachs & Co. LLC is serving as exclusive financial advisor to Six Flags.

Cedar Fair is one of the largest regional amusement park operators in the world. Headquartered in Sandusky, Ohio, the company owns and operates over a dozen amusement parks, water parks, and hotels in the United States and Canada. Some of its most well-known properties include Cedar Point in Sandusky, home to over 70 rides including the record-holding Steel Vengeance roller coaster; Knott's Berry Farm near Los Angeles, famous for its Wild West Ghost Town attractions; and Canada's Wonderland outside of Toronto, the largest theme park in Canada. Six Flags was founded in 1961, the company owns and operates over two dozen theme and water parks across North America. Iconic locations include Six Flags Magic Mountain near Los Angeles, known for epic coasters like Twisted Colossus and Full Throttle; Six Flags Great Adventure in New Jersey, home to the iconic ride Kingda Ka; and Six Flags Over Texas near Dallas, featuring the oldest wooden coaster in the US, Texas Giant. International holdings include Six Flags Mexico outside Mexico City and La Ronde in Montreal.

Amusement parks experienced a recovery post-pandemic but struggled to raise attendance. It is reported that Six Flags faced a struggle after the pandemic due to raising prices and reducing discounts after being known for inexpensive tickets. A merger of Six Flags and Cedar Fair is expected to lower costs for both of the companies. Six Flags and Cedar Fair anticipate $120 million in cost savings within two years of closing the deal. This merger could also help the combined company to be better positioned competitively against amusement park giants like Disney and SeaWorld due to its increased size and reach. Cedar Fair and Six Flags have little geographical overlap, the combined company will face lower seasonal volatility. A blended network of parks across North America could support offerings like annual passes usable at multiple locations, incentivizing more visits. Currently, Cedar Fair operates as a master limited partnership (MLP), a structure that allows it to avoid corporate taxes. However, MLPs are excluded from many stock indexes like the S&P 500 due to their tax complexity. This limits their ability to attract large institutional investors. By abandoning its MLP status as part of the merger, the combined company would no longer face these indexing restrictions. This would help the combined company to win new potential investments.

The deal delivers almost no premium to shareholders of either company. After rumours of the deal spread, Cedar Fair's stock increased by 9% from $34.40 on October 30th to $37.51 on November 1st. Six Flags' stock price increased by 7% from $19.68 on October 30th to $21 on November 1st. The merger is expected to be closed in the first half of 2024, with the combined company adopting the name Six Flags.

In conclusion, the merger agreement between Cedar Fair and Six Flags aims to create a larger, stronger combined company in the theme park industry. By joining their extensive portfolio of parks, attractions, and intellectual property licences, the new entity hopes to more effectively compete against rivals like Disney and SeaWorld.

Written by: Jessica Feng

Sources: Mergerlinks, Reuters, The Associated Press, Cedar Fair Press Release

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