Taylor Swift (L) and Travis Kelce are seen within the Meatpacking District on Dec. 28, 2024 in New York Metropolis.
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Firm: Six Flags Leisure (FUN)
Enterprise: Six Flags Leisure is a regional amusement-resort operator with roughly 27 amusement parks, 15 water parks and 9 resort properties throughout 17 states in the US, Canada and Mexico. The corporate supplies memorable experiences to thousands and thousands of visitors yearly with coasters, themed rides, thrilling water parks, resorts and a portfolio of mental property corresponding to Looney Tunes, DC Comics and Peanuts. The corporate’s parks embody Hurricane Harbor Phoenix, California’s Nice America, Knott’s Berry Farm, Knott’s Soak Metropolis Waterpark, Six Flags Magic Mountain, Six Flags Discovery Kingdom, Six Flags Over Georgia, Six Flags White Water, Cedar Level Shores Waterpark, Six Flags Nice America, Six Flags Fiesta Texas, Hurricane Harbor Splashtown, Dorney Park & Wildwater Kingdom and others.
Inventory Market Worth: $2.60 billion ($25.63 per share)
Six Flags Leisure inventory 12 months to this point
Activist: Jana Companions
Possession: ~9%
Common Price: n/a
Activist Commentary: Jana is a really skilled activist investor based in 2001 by Barry Rosenstein. They made their identify taking deeply researched activist positions with well-conceived plans for long-term worth. Rosenstein known as his activist technique “V cubed.” The three “Vs” have been: (i) Worth: shopping for on the proper value; (ii) Votes: understanding whether or not you might have the votes earlier than commencing a proxy struggle; and (iii) Number of methods to win: having a couple of technique to reinforce worth and exit an funding. Since 2008, they’ve regularly shifted that technique to at least one which we characterize because the three “Ss” (i) Inventory value – shopping for on the proper value; (ii) Strategic activism – sale of firm or spinoff of a enterprise; and (iii) Star advisors/nominees – aligning with high business executives to advise them and take board seats if vital.
What’s taking place
On Oct. 21, Jana introduced that it had partnered with Travis Kelce, Glenn Murphy and Dave Habiger in an funding in Six Flags Leisure and plans to have interaction with the corporate’s board and administration relating to alternatives to reinforce shareholder worth and enhance the visitor expertise.
Behind the scenes
Six Flags Leisure is a regional amusement-resort operator with roughly 27 amusement parks, 15 water parks and 9 resort properties throughout 17 states in the US, Canada and Mexico. In November 2023, Six Flags introduced that it will be merging with Cedar Truthful. Whereas this information obtained backlash from some buyers, most notably from activist Land & Buildings, the merger was accomplished in July 2024. On the time, this merger appeared like a possibility to mix Six Flags’ regional dominance in amusement parks, sturdy licensing preparations (corresponding to its lifetime IP settlement with Warner Brothers) and trendy tech and pricing spine with Cedar Truthful’s operational self-discipline, best-in-class park expertise and excessive buyer satisfaction fee to generate synergies and elevate Six Flags’ asset worth.
Nonetheless, this association has not likely gone as deliberate. Within the second quarter, Six Flags confronted extreme climate situations throughout their typical peak Could to June season, which resulted in substantial EBITDA and attendance misses. Furthermore, the corporate entered this era extremely levered from the merger, and these misses solely amplified the corporate’s steadiness sheet issues within the eyes of buyers. This despatched Six Flags’ share value down over 58% from the completion of the Cedar Truthful merger to the day previous to Jana’s announcement.
Inventory motion like this on in any other case sturdy companies that is because of an idiosyncratic occasion like climate that’s not prone to recur usually will get the eye of fine worth buyers. Nonetheless, Six Flags does produce other points, particularly poor operational execution, integrating the Cedar Truthful merger and figuring out a brand new CEO, as CEO Richard Zimmerman has introduced he’s stepping down from his function on the finish of 2025.
Jana Companions is now the fifth activist investor on this inventory. Different embody Sachem Head (4.82%), H Companions (4.59%), Dendur (4.38%) and Land & Buildings (n/a). All of these different activists, besides L&B, have obtained board illustration.
Jana, because it typically does, is coming in with an All-Star workforce: Glenn Murphy, govt chairman of Petco and former chairman and CEO of the Hole; Dave Habiger, chairman of Reddit; and NFL Celebrity Travis Kelce. The funding group holds a roughly 9% financial curiosity and plans to have interaction Six Flags’ board and administration workforce to discover methods to reinforce shareholder worth and enhance the visitor expertise.
A lot of Jana’s marketing campaign echoes the qualms already raised by the opposite activists within the inventory, together with the corporate’s potential to unlock worth by reinvigorating the enterprise as a standalone firm with a brand new CEO and/or monetizing the actual property, and even promoting your entire firm. No matter which plan is pursued, the corporate should instantly begin down the street of fixing its operational points.
Operationally, Six Flags has forfeited a considerable alternative by failing to combine its consumer-facing know-how. Greater than a 12 months post-merger, Six Flags nonetheless operates over 10 totally different apps, and even fundamental transactions like buying a season move on the web site have been unreliable, so modernizing and streamlining this know-how may go a great distance.
The corporate additionally must reexamine its working technique throughout inclement climate and undertake a extra disciplined capex framework. For instance, regardless of this poor climate throughout the second quarter, Six Flags nonetheless saved its parks open on extra days throughout this quarter than the identical interval final 12 months, leading to important and pointless losses.
Jana additionally believes Six Flags has the chance to leverage its current actual property to implement year-round and inclement weatherproof experiences, corresponding to indoor skydiving and trampoline parks.
Kelce cool issue
Subsequent, the corporate must reinvigorate its promoting and advertising and marketing. Six Flags is without doubt one of the most recognizable leisure manufacturers, however its promoting has been stale, abandoning regional advertising and marketing efforts whereas additionally lacking the chance to leverage its nationwide scale. Whereas the brand new CEO will probably have good concepts on this space, accessing Travis Kelce, probably the most standard and appreciated celebrities on this planet throughout all demographics is a useful potential advertising and marketing asset. (For instance, look what Sydney Sweeney has already completed for American Eagle with only one advert.)
Kelce has not signed on as a model ambassador or in any capability apart from as a shareholder, however he’s a real fan of amusement parks like Six Flags, has already added promoting worth to the corporate simply by speaking about it on his podcast and there may be all the time a possible to do extra with him both informally or via some kind of an settlement. Model revitalization catalyzed by Kelce’s energetic involvement supplies a significant alternative to raise attendance and engagement at Six Flags.
JANA’s partnership with Mr. Kelce is unprecedented in two respects: 1) it pairs an activist and a world-famous superstar that has personally invested within the firm and is utilizing their star energy to spice up the corporate’s model from the skin in a extremely genuine method, and a pair of) it brings a superbly tailor-made answer to rejuvenate the corporate’s branding and advertising and marketing, reaffirming its cool issue and resolving any concern about Six Flag’s model relevance that has weighed on the corporate’s a number of.
Lastly, and doubtless most significantly, the continued CEO course of presents a golden alternative to recruit a world class operator able to executing upon these initiatives. On the earth of shareholder activism, there will not be many higher alternatives for worth creation than the activist having a say in figuring out a brand new CEO for an important however struggling enterprise.
With a number of activists taking part on this course of, we might count on the brand new CEO to be a first-rate operator with sturdy views on creating worth for shareholders. Furthermore, a reconstituted board over the previous a number of years and the addition of Kelce as a possible formal or casual model ambassador could enhance the standard of the candidate pool.
That each one being mentioned, a CEO emptiness can also be typically the right time to discover strategic alternate options, and Jana remains to be urging the corporate to guage a possible sale of underperforming parks and/or your entire firm.
Ought to Six Flags place itself for a sale, there would probably be each personal fairness and strategic curiosity. Apollo, for instance, tried to amass Cedar Truthful again in 2010 earlier than their merger fell via resulting from lack of investor help, and Blackstone already owns Nice Wolf Lodge – a complementary asset.
By way of strategics, the rising media and leisure development of integrating bodily park belongings into cross-platform media ecosystems makes the business a logical candidate. Media titans like Disney and Comcast have already supplied the blueprint on learn how to leverage amusement parks to advertise mental property.
Paramount, the third peer to Disney and Comcast, is the one one with out an amusement park after curiously promoting 5 Paramount Parks to Cedar Truthful in 2006. This turns into much more intriguing now that Paramount has made a $57 billion bid to amass Warner Bros Discovery. Six Flags has a licensing settlement with Warner Brothers and at a present $2.6 billion market cap, could be a logical add-on to its acquisition by Paramount, or any strategic investor for that matter. (Netflix has additionally proven curiosity).
Jana is a extremely skilled activist with a observe document for displaying up with operators tailored for a corporation’s particular issues, and that is precisely what they’ve completed right here. The proper model ambassador and two company legends with virtually unparalleled shopper and technology-based operational turnaround experience could also be precisely the drugs required right here. With that in thoughts, we might usually argue that that is too crowded of a shareholder base for Jana to realize board illustration, as there are already six administrators on the board who have been appointed pursuant to an activist settlement. Nonetheless, we consider that the activists with representatives already on the board are like-minded to Jana and would welcome administrators of this high quality to assist pursue a path all of them appear to agree on.
Ken Squire is the founder and president of 13D Monitor, an institutional analysis service on shareholder activism, and the founder and portfolio supervisor of the 13D Activist Fund, a mutual fund that invests in a portfolio of activist investments.
Disclosure: Comcast is the dad or mum firm of NBCUniversal, which owns CNBC. Versant would develop into the brand new dad or mum firm of CNBC upon Comcast’s deliberate spinoff of Versant.
