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SeaWorld’s bid for Cedar Truthful is sensible, however it might must pay extra

Visitors journey the Bayside Skyride at SeaWorld on July 20, 2021 in San Diego, California.

Daniel Knighton | Getty Photos Leisure | Getty Photos

Theme park consultants aren’t stunned that SeaWorld is seeking to purchase Cedar Fair, however the worth may not be proper, but.

The corporate’s daring proposal, one that is reportedly worth $3.4 billion, would considerably strengthen SeaWorld’s foothold in an trade that’s dominated by solely a handful of gamers.

“The extra we take into consideration this potential deal, the extra it makes whole sense to us,” Stifel analyst Steven Wieczynski wrote in a analysis be aware printed Tuesday.

Combining SeaWorld and Cedar Truthful’s belongings, which might be greater than 20 parks, means SeaWorld would have the potential to generate $3.4 billion in income in 2023, he stated.

Cedar Truthful is among the largest regional theme park operators on the planet, with a market cap of $2.82 billion. For comparability, SeaWorld has a market cap of $4.6 billion.

“In our opinion, [SeaWorld] has lacked a extra strong geographical footprint and lack of season move penetration,” Wieczynski wrote. “Buying [Cedar Fair] would give them a much bigger presence throughout North America and would permit them to extra successfully cross market a few of their greater belongings.”

SeaWorld, which additionally owns Busch Gardens and Sesame Place, has lengthy battled perceptions of its animal-based amusement enterprise. Including Cedar Truthful’s parks, which embody Knott’s Berry Farm and California Nice America, would diversify its portfolio and diminish its reliance on animal points of interest, Wieczynski stated.

SeaWorld would additionally profit from Cedar Truthful’s undeveloped land portfolio, which incorporates round 1,400 acres round its theme parks. This could possibly be used to develop accommodations, sports activities complexes or water parks, amongst different ventures.

“Given the extraordinarily excessive boundaries to entry (e.g., land availability, allowing and constructing restrictions, excessive development prices, and many others.) coupled with the sturdy regional loyalty created by seasonal/annual move subscriptions, we’ve all the time considered the regional theme park phase as ripe for additional consolidation,” Eric Wold, analyst at B. Riley Securities, wrote in a analysis be aware printed Wednesday. “Particularly when enticing income and price synergies are considered to spice up returns.”

Lately, there have been many makes an attempt by theme park chains to purchase one another out. In 2019, Cedar Truthful rebuffed a $4 billion provide from Six Flags for round $70 per share. U.Ok.-based Merlin Entertainments, which owns Legoland and Madame Tussauds, quashed experiences in 2017 that it was contemplating a bid for SeaWorld.

SeaWorld’s present bid reportedly provides Cedar Truthful $60 per share, or an enterprise worth of round $5.8 billion. Expectations are that attendance charges will proceed to rise and even surpass prepandemic ranges by subsequent yr, that means the bid could possibly be too low to entice Cedar Truthful to agree.

“We imagine buying [Cedar Fair] at $60 a share would signify a really favorable deal for [SeaWorld] shareholders given the potential accretion that could possibly be realized,” Wieczynski stated. “Primarily based on our math, we imagine SeaWorld might provide upwards of $70 to $80 [a share] earlier than the deal would grow to be much less priceless.”

Shares of Cedar Truthful had been up practically 4% on Wednesday, reaching a 52-week excessive of $58.49.

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