Anheuser-Busch to Buy Sea Worlds for $1.1 Billion
Continuing its strategy of diversifying out of the beer business, Anheuser-Busch Cos. signed a definitive agreement Thursday to buy the four Sea World theme parks and certain other properties from publisher Harcourt Brace Jovanovich for $1.1 billion.
The agreement, which ends three months of intense speculation in the tourism industry, calls for Anheuser-Busch to pay $975 million for six theme parks--including one in San Diego--and $125 million for 1,200 acres of undeveloped land, much of it near the Orlando, Fla., airport. Anheuser-Busch, based in St. Louis, apparently beat out at least three other bidders: MCA Inc., parent of Universal Studios; the investment firm Wesray Capital, and a group of former Sea World managers who were financed in part by the investment bank Morgan Stanley & Co.
The six parks to be acquired include Sea Worlds in San Diego, Orlando, San Antonio and Aurora, Ohio, plus the Cypress Gardens water theme park in Winter Haven, Fla., and Boardwalk & Baseball in Haines City, Fla. HBJ, whose headquarters are in Orlando, said the parks generated $62 million in pretax operating profit on $388 million in revenue last year.
The acquisition of the Sea World parks, with their trained killer whales, dolphins, seals and other marine creatures, are a “natural fit” with Anheuser-Busch’s family entertainment subsidiary, Busch Entertainment Corp., which owns Busch Gardens theme parks in Tampa, Fla., and in Williamsburg, Va., said W. Randolph Baker, president of Busch Entertainment.
Busch Gardens in Tampa has an African zoological theme and is home to 3,000 animals, Baker said. Anheuser-Busch also owns Adventure Island, a water park in Tampa, and Sesame Place, a children’s park located near Philadelphia, and is planning a $300-million theme park and resort along the Mediterranean coast just south of Barcelona, Spain, that the company hopes to open in time for the 1992 Summer Olympics.
John Bierbusse, an investment analyst at A. G. Edwards & Sons in St. Louis, said that even with the acquisition of the HBJ parks, beer is overwhelmingly still king among Anheuser-Busch’s businesses. Last year, the beer and food businesses accounted for 96% of the company’s $8.9 billion in revenue and 97% of its $716 million in net income.
“The key point is that, while this deal is a sizable one, the earnings impact is fairly minor,” Bierbusse said. In fact, the deal prompted Bierbusse to lower his 1990 earnings estimate for Anheuser-Busch to $3.10 per share from his previous estimate of $3.20 per share.
The deal also calls for HBJ to receive up to $100 million from possible future sales by Anheuser-Busch of undeveloped HBJ land over the next 10 years. HBJ officials did not return several telephone calls seeking comment on the sale.
The price being paid by Anheuser-Busch is at the bottom end of the range of analysts’ estimates, which went as high as $1.5 billion. The value of the parks may have been depressed by declining attendance in the last two years.
Competition for the tourism dollar in central Florida, where the largest and most profitable Sea World is located, intensified in May, when the $400-million Disney-MGM Studios Theme Park tour opened at Disney World in Orlando. Competition will grow even more fierce next spring when MCA’s Universal Studios Florida tour opens.
Attendance at the three Sea Worlds that had been open for a full year was 11.6 million in 1988, down from 11.9 million in 1987, Baker said. In May, 1988, HBJ opened its its fourth Sea World in San Antonio, attracting 2.9 million visitors in its first eight months of business.
Softness Predicted
“The attendance softness is a function of the Disney studio tour, a major new competitor. That softness was expected, it was projected and it happened,” Baker said. “It happened with (Disney World’s) Epcot opening in 1982. Sea World was hit then, but then strengthened as the newness of (Epcot) wore off.”
The death in August of Kandu, one of the San Diego Sea World’s trained killer whales, may also have negatively affected the Sea Worlds’ value, industry observers said.
HBJ said in June that it was selling its parks in order to reduce its $2.6-billion debt. That amount remained from $3 billion in debt used to fend off a hostile takeover attempt by British publisher Robert Maxwell in 1987.
In announcing its decision to sell the parks, HBJ said the debt service on the loans, which last year amounted to $327 million, made it impossible for HBJ to invest adequately in its publishing ventures or its parks. In the second quarter of this year, for example, HBJ’s interest expense on its debt totaled $91.6 million; its pretax earnings for the same period were only $46.7 million.
A Severe Handicap
Many in the industry cited HBJ’s failure to add new attractions at its parks over the last two years as a reason for the soft attendance. In a business where the ability to trumpet a new shark tank or penguin exhibit provides critical marketing fodder against competitors such as Disney, that is a severe handicap. HBJ’s staff and advertising budgets have also been cut drastically over the last two years as a result of the restructuring.
Baker said Anheuser-Busch plans to “spend aggressively” on new attractions at the Sea World parks but would not offer specifics. Baker said Anheuser-Busch had no plans to sell Cypress Gardens, Boardwalk & Baseball or the Ohio Sea World, which is open only five months of the year.
No senior HBJ managers will be hired by Anheuser-Busch to help run the parks, Baker said. Robert Evanson, HBJ’s senior vice president in charge of the amusements, will stay with the publishing company. No layoffs are planned for the parks’ 10,000 employees, Baker said.
