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Knott's Berry Farm parent Cedar Fair agrees to buyout by Apollo

December 16, 2009 |  8:12 pm

Cedar Fair, which owns Knott’s Berry Farm in Buena Park and other amusement parks nationwide, agreed late Wednesday to a $2.4-billion buyout by private equity firm Apollo Global Management.

The deal follows a poor summer for Cedar Fair as the lousy economy clipped park attendance. The Sandusky, Ohio, company’s shares plunged as low as $6.10 in November, from $11.15 in mid-September, after the firm on Nov. 3 said nine-month revenue slumped nearly 8% from a year earlier, to $810 million.

Cedar Fair also warned in the Nov. 3 report that attendance trends remained negative in October.

Besides Knott’s Berry Farm, Cedar Fair’s 11 parks include Cedar Point in Ohio, Kings Dominion in Virginia and the Great America park in Santa Clara, Calif. It also owns seven water parks and five hotels.

Silverbullet New York-based Apollo, led by Leon Black, said it would pay $11.50 a share for Cedar Fair, a 27% premium to the stock’s closing price of $9.08 on Wednesday.

The buyout price is about one-third what Cedar Fair was worth at its peak share price of $35.71 in 2004.

The stock will cost Apollo about $635 million. Apollo said the $2.4-billion deal total includes refinancing of the company’s debt.

Cedar Fair’s heavy debt load has been a source of worry for the company’s equity investors. Crushing debt pushed one of the firm’s rivals, Six Flags Inc., to file for bankruptcy protection in June.

Cedar Fair CEO Dick Kinzel said that after considering a range of alternatives for the company, “We have concluded that the transaction with Apollo is in the best interest” of shareholders.

J.P. Morgan, Bank of America Merrill Lynch, Barclays Capital, UBS Investment Bank and KeyBanc Capital Markets agreed to provide nearly $2 billion in financing commitments for the buyout, Apollo said.

The deal is another sign that the corporate takeover business is reviving as lenders open the credit spigot to fund buyout activity. On Monday Exxon Mobil Corp. agreed to pay $31 billion for XTO Energy.

Apollo’s reputation has taken a hit this year amid the scandal over so-called placement agents in the pension fund business.

The California Public Employees’ Retirement System in October disclosed that Apollo had paid about $46 million in fees to Alfred Villalobos, a former CalPERS board member who now works as an intermediary helping Apollo and other funds market their investment products to institutional investors such as CalPERS.

The pension fund subsequently said it was reviewing its relationship with Apollo, citing deep losses incurred on CalPERS investments made with the buyout firm.

-- Tom Petruno

Photo: Aboard the Silver Bullet at Knott's Berry Farm. Credit: Bob Chamberlin / Los Angeles Times