Publicly traded limited partnership Cedar Fair (FUN) will get the Paramount Parks company of CBS Corp (CBS) for around $1.25 billion. )
Cedar Fair Cash Deals currently operates seven amusement parks and five water parks, including the organization’s flagship Cedar Point land on Lake Erie. The business plans to maintain all five possessions. The rate of interest charged will be decided once Cedar Fair’s debt was rated.
The purchase is rather large relative to the magnitude of Cedar Fair’s present company Fair Cash Deal. Cedar Fair made $569 million in earnings during 2005. During precisely the exact same time interval, the Paramount Parks possessions created $423 million in earnings.
Along with the five parks, Cedar Fair will get Star Trek: The Experience (in the Las Vegas Hilton) and the Nickelodeon license in the Paramount Parks.
Based on previous attendance, the five acquired possessions will probably be a few of the most visited parks at the new Cedar Fair portfolio.
Definitely, the two biggest parks being obtained are Canada’s Wonderland (situated near Toronto) and Kings Island (situated near Cincinnati).
“This purchase will offer exciting new expansion opportunities and the prospect of meaningful incremental free cash flow as we reach $20-$30 million in annual cash flow synergies during the next 3-5 decades. It is going to also add substantial geographical diversity into our portfolio of parks and better our position among the largest regional amusement park operators in the world.”
The purchase will require substantial debt funding. On the other hand, the amusement park industry generally has a rather high free cash flow margin. Cedar Fair’s present properties are exceptional generators of free cash flow. The business makes big cash distributions to unitholders; the present yield is somewhere about 6.85percent (reminder: Cedar Fair is a Limited Partnership). Returns on both equity and assets have normally been high.
The deal is anticipated to close in the third quarter of 2006. Most analysts consider CBS will utilize the approximately $1 billion in earnings profits to buy back shares.
The Cinicim team during the the previous ten decades, Cedar Fair has compounded its book value per share at a yearly rate of 8.11percent and earnings per share for a yearly rate of 6.30 percent.