Stock Wars: Cedar Fair Vs. SeaWorld Entertainment

Benzinga’s weekly Stock Wars matches up two leaders in a major industry sector with the goal of determining which company is the better investment.

This week, the duel is between two leading theme park companies: Cedar Fair, L.P. FUN and SeaWorld Entertainment Inc. SEAS.

The Case For Cedar Fair: This company traces its roots back to the 1870s at the Cedar Point bathing resort on Lake Erie at Sandusky, Ohio. The resort’s popularity grew to the point that the Cedar Point Pleasure Resort Company was established in 1887. The company stayed focused on Sandusky until it acquired Minnesota’s Valleyfair amusement park in 1978 and transitioned into Cedar Fair Limited Partnership in 1983, with an initial public offering in 1987.

Today, Cedar Fair is still based in Sandusky and it owns and operates 11 amusement parks, five water parks and 11 hotels in eight states and the Canadian province of Ontario. The best-known assets in its portfolio are California’s Knott’s Berry Farm, Virginia’s Kings Dominion and Pennsylvania’s Dorney Park.

In recent corporate developments, the biggest story involving Cedar Fair involved an unsolicited acquisition bid by SeaWorld Entertainment. Last month, Cedar Fair rejected the offer, with CEO Richard Zimmerman informing the audience on the Feb. 16 fourth-quarter earnings report, "Consistent with its fiduciary responsibilities, our board, together with its external advisors, carefully evaluated the proposal and determined it was not in the best interests of the company and its unitholders."

This marked the second time in three years that Cedar Fair was the object of an unsolicited acquisition bid. In 2019, the company swatted away a $4 billion offer from Six Flags Entertainment Corp. SIX, stating the bid was too low.

Last August, Cedar Fair announced additions were planned for several of its venues for the 2022 season, including a new themed area at Kings Dominion, a 50th-anniversary celebration at Kings Island in Mason, Ohio, and the reopening of two newly refurbished resort properties at Cedar Point in Sandusky.

In its most recent earnings report, the fourth-quarter data published on Feb. 16, Cedar Fair recorded net revenues of $350.9 million compared to $33.8 million from one year earlier, and a net loss of $27 million versus a $105 million net loss in the previous year. The company’s net revenues for full-year 2021 was $1.34 billion, which was below the $1.47 billion during pre-COVID019 pandemic 2019.

“We are extremely pleased with our 2021 results, particularly given the level of uncertainty with which we entered the year and the ongoing headwinds of the pandemic,” said Zimmerman. “Our key strategic initiatives focused on broadening and enhancing the guest experience are clearly resonating with consumers. As a result, we produced revenues over the second half of 2021 that outpaced the record revenues of the comparable six-month period in 2019 by 14%, an increase of more than $130 million.”

Cedar Fair shares opened for trading on Wednesday at $54.22; the company’s 52-week range is $39.15 to $62.56 per Benzinga Pro.

See Also: The complete Stock Wars series

The Case For SeaWorld Entertainment: This company traces its roots to Anheuser-Busch Inc.’s Tampa-based amusement park Busch Gardens, which opened in 1959. Additional parks opened over the years and in September 1989 the company acquired Harcourt Brace Jovanovich Park Group, whose portfolio included the SeaWorld theme park chain. In 2008, Anheuser-Busch was acquired by Brazilian-Belgian brewer InBev and became Anheuser-Busch Inbev SA BUD, and one year later the company’s theme parks operations were sold to Blackstone Inc. BX for $2.7 billion.

The acquired entity became SeaWorld Parks & Entertainment until December 2012’s initial public offering, when took on the current name. Today’s company has a portfolio of 12 destination and regional theme parks in the U.S. and it owns or licenses such recognized brands as SeaWorld, Busch Gardens, Aquatica, Sesame Place and Sea Rescue.

As mentioned earlier, the major corporate development for SeaWorld Entertainment was a failed unsolicited acquisition bid for Cedar Fair. The company announced its failure in a Feb. 15 unattributed press statement that tersely confirmed, “In response to inquiries from various stakeholders, we confirm that our offer to acquire Cedar Fair was rejected. Unfortunately, we do not see a path to a transaction.”

The company had more success this past weekend with the opening of its first new park in nine years: Sesame Place San Diego, created in partnership with Sesame Workshop, the nonprofit educational organization behind the Sesame Street franchise. Marc Swanson, CEO of SeaWorld Entertainment, had high hopes for the new attraction and promised it was the start of a push “to expand our offerings in the coming years with exciting experiences for our guests.”

In its most recent quarterly earnings report, the fourth-quarter data published on Feb. 24, SeaWorld Entertainment recorded total revenue of $370.8 million, up from $154.1 million one year earlier, and it also recorded $71.5 million in net income, up from a net loss of $45.6 million in the previous year. For full-year 2021, SeaWorld Entertainment’s total revenue was a record $1.5 billion, up from $1.39 billion in pre-pandemic 2019.

“While we have made good progress on our plans, as we look to the future, we continue to be highly confident that we can deliver even more operational and financial improvements that we expect will lead to meaningful increases in shareholder value,” said Swanson. “In particular, we believe our forward ride, attraction and park enhancement investment plans are the most robust they have ever been, and currently reflect the cadence, focus areas and strategies we have been working towards. We continue to improve our commercial functionality with investments in talent and capabilities in revenue management and marketing and have opportunities for continued improvement in these areas.”

SeaWorld Entertainment shares opened for trading on Wednesday at $73.42; the company’s 52-week range is $41.94 to $74.10 per Benzinga Pro.

The Verdict: The theme park business suffered during the last two years, first with total closures due to the coronavirus pandemic and then with restricted admission levels once public officials began to tiptoe back into a modicum of normal behavior. The fact these two companies are still operational is a testament to their respective leaderships and workforces. Unlike Walt Disney Co. DIS or Comcast Corporation CMCSA with multiple divisions that could buffer the losses recorded from their theme parks, Central Fair and SeaWorld Entertainment don’t have streaming services or television operations to fall back on.

Of the two, SeaWorld Entertainment is now in a stronger position. Not only did it come out of the fourth quarter and full-year 2021 with a better revenue stream, but its 20.2 million visitors in 2021 outpaced the 19.5 million at Central Fair — both companies saw their 2021 attendance figures at roughly 70% of the pre-pandemic 2019 figures. And SeaWorld Entertainment is kicking off its 2022 season with a new venue, albeit a relatively modest 17-acre theme park.

But still, Central Fair had the audacity to turn down SeaWorld Entertainment’s acquisition offer. Central Fair is clearly eager to regain revenue and audiences lost in the pandemic — and knowing this is the second time in three years that the company rejected a takeover offer suggests their hunger for success is powerful.

While SeaWorld Entertainment is in a more solid financial position and deserves investor attention, this Stock Wars duel is going to Central Fair as the scrappy player who plays by its rules. By year’s end, it will be interesting to see if the company’s can-do attitude will translate into a windfall for investors.

Photo: Paul Brennan / Pixabay