Magic Mountain to Be Sold With Other Six Flags Parks to Wesray for $350 Million
Six Flags Magic Mountain near Valencia is being sold, along with the rest of the Six Flags amusement park chain, to a private investment firm headed by former Treasury Secretary William E. Simon for $350 million in cash, it was announced Tuesday.
The investment firm, Wesray Capital Corp., plans to keep Magic Mountain and the other amusement parks open and operating through a separate subsidiary, said William H. Peltier, spokesman for Bally Manufacturing. Bally has owned the Six Flags parks since 1982.
Chicago-based Bally, which let it be known last month that it was interested in selling its Six Flags subsidiary, plans to use the proceeds from the sale to reduce its hefty $1.6 billion in debt and for general corporate purposes. The sale will result in an after-tax profit of $100 million and wipe out $250 million in Six Flags debt now on Bally’s books, a company official said.
Part of Buying Spree
Tuesday’s agreement seems to be part of a billion-dollar buying spree for Simon and the investment firms he heads. In the past few years, Wesray has acquired more than 20 companies, including Wilson Sporting Goods Inc. and Avis Inc.
He also heads a separate investor group, which has bought Beverly Hills-based World Trade Bank, Westcoast Savings in Pacific Palisades and Westwood Savings & Loan. The group is also waiting for approval to buy two more savings and loans.
In agreeing to buy Six Flags, Wesray is getting a profitable business, Bally officials said, but one that no longer fit into Bally’s strategy to concentrate on the casino and gaming industry.
Bally has become one of the nation’s largest casino owners--piling up a significant amount of debt in the process--by purchasing the MGM Grand casino-hotels in Nevada for $440 million and Golden Nugget Casino Hotel in Atlantic City for $439 million.
Besides buying casinos, Bally has been busy fending off a takeover threat by New York developer Donald Trump. Bally bought back $83.7 million worth of its shares from Trump.
Since Bally bought the Six Flags chain from Penn Central in 1982 for $160 million, the subsidiary has proved to be a major source of sales and profit. In 1986, the subsidiary generated $369 million of Bally’s total $1.638 billion in revenue. Six Flags 1986 operating profit of $48.5 million accounted for more than 25% of Bally’s $187 million in total profit, the company said.
In composite trading Tuesday on the New York Stock Exchange, Bally stock closed at $19.25 a share, up 75 cents.
“The sale of the parks will allow it (Bally) to be more focused and less leveraged,” said entertainment analyst Mark Manson at Donaldson, Lufkin & Jenrette. Manson said the amusement park subsidiary was a “cash cow,” but “it was not a growth business.” The gaming industry provides more opportunities for growth, he said.
Located just west of Interstate 5 about 35 miles northwest of downtown Los Angeles, Magic Mountain reported 2.75 million visitors--the adult admission fee is $17--in 1986.
Spokeswoman Sherrie Bang says the park expects that visits to the park, which features the Colossus roller coaster and a 346-foot observation tower, will increase to 2.8 million this year. The park--the biggest employer in the Santa Clarita Valley with 3,000 mostly part-time workers--is only open on weekends, except during the summer and school holidays.
In the early 1970s, however, when attendance was not always up to par, financial analysts had a nickname for Magic Mountain: They called it “Tragic Mountain.”
That’s changed, Bally officials say, although it still is dogged by a remote location. “People don’t just accidentally happen on Magic Mountain,” said Scott Piazza, another spokesman for the park, who noted that the facility advertises its proximity to other tourist attractions by saying it is “25 miles north of Universal Studios.”
Local real-estate experts interviewed Tuesday said they would expect Wesray to benefit from residential and commercial real estate development in the area, including plans for a hotel nearby.
“There’s no need to tear down the rides to build condos,” said Carla Gazzolo, vice president for Coldwell Banker Commercial Real Estate Services in Sherman Oaks.
Meanwhile, the Newhall Land & Farming Co., a major developer in the area and an original co-owner of Magic Mountain, intends to build a hotel and resort complex on land sandwiched between the park and Interstate 5.
“The hope is the hotel and the park would feed off one another,” Newhall Executive Vice President Robert Wilke said.
Newhall and Sea World Inc. of San Diego built Magic Mountain in 1971 for about $20 million. In 1979, the park was acquired by Six Flags Corp. Three years later, Six Flags became a part of Bally.
Bally says it expects the sale to be finalized in early May. Kidder, Peabody & Co. will provide Wesray with interim financing to complete the transaction. Wesray officials in the company’s offices in Morristown, N.J., and New York did not return calls Tuesday.
SIX FLAGS Amusement parks: Six Flags Magic Mountain, Valencia Six Flags Over Texas, Arlington, Tex., near Dallas Six Flags Over Georgia, Mableton, Ga., near Atlanta Six Flags Over Mid America, Eureka, Mo., near St. Louis Six Flags Great Adventure, Jackson, N.J. Six Flags Great America, Gurnee, Ill., between Chicago and Milwaukee. Six Flags Astroworld, Houston. Six Flags Atlantis, water park in Hollywood, Fla. Six Flags Waterworld, water park in Houston. WESRAY CAPITAL Holdings include: Avis Inc. Anchor Glass Container Corp. Heekin Can Inc. Wear-Ever Proctor Silex Inc. Western Auto Supply Co. Wilson Sporting Goods Co. Simmons U.S.A. Corp.
