Time Warner, 2 Banks Offer $700 Million for Six Flags

Time Warner Inc. and two New York investment banks have made a joint $700-million offer to acquire Six Flags Corp., an amusement park firm that operates Magic Mountain in Valencia and six other theme parks, Six Flags sources confirmed Monday.

Time Warner, which already owns about 20% of Arlington, Tex.-based Six Flags, reportedly has offered to invest $30 million to raise its stake to 50%. Time Warner’s partners are the Blackstone Group and Wertheim Schroder & Co., sources said.

Blackstone would invest $70 million for 35% of Six Flags, and Wertheim Schroder would invest $30 million for a 15% stake. In addition to the equity purchases, the three bidders would set up an acquisition company that would cover the remaining $570 million with bank loans and securities financing, sources said.

Time Warner, Blackstone and Wertheim Schroder had no immediate comment on the purported offer. Six Flags said there have been discussions, but made no official comment on the provisions of a bid.

“The company intends to study this proposal closely and to withhold further comment until after this review,” Six Flags said in a statement Monday.

Six Flags has been struggling to eliminate a $610-million debt that it took on during a 1987 management-led leveraged buyout from Bally Corp. After paying $80 million in interest in 1990, Six Flags posted a net loss of about $25.4 million on revenue of $431 million. The company lost $18.1 million during the first six months of this year on revenue of about $180 million.

Six Flags stock is closely held and isn’t traded on any exchange. However, because its high-yield junk bonds are publicly registered, Six Flags must regularly file financial reports with the Securities and Exchange Commission.

In an earnings report filed in April, Six Flags said it might have to “seek the protection of the federal bankruptcy laws” if it can’t modify certain credit arrangements with its lenders. The company has been trying to renegotiate loans with its bank lenders, including Security Pacific, in recent months.

Besides Magic Mountain, Six Flags owns theme parks in Chicago, Houston, St. Louis and New Jersey. The company operates Six Flags Over Texas in Arlington and a park in Atlanta but doesn’t have an ownership stake in them.

Of the six properties, Six Flags executives have considered Magic Mountain the most profitable. Attendance at Magic Mountain rose 4% to 3.2 million in 1990, generating $92 million in revenue, according to the company.

Time Warner has also had debt problems. However, many analysts say the Six Flags deal, as structured, would not pose a burden on the media giant because the proposed new acquisition company--not Time Warner--would assume the $570 million in buyout costs.

Time Warner--which owns the rights to cartoon characters such as Bugs Bunny and Daffy Duck that are already licensed by Six Flags--is looking for ways to further promote its properties, said Paul Marsh, an analyst at Bateman Eichler, Hill Richards.

“There is real appeal in the theme park business,” Marsh said. “Time Warner could merchandise Bugs Bunny much like Disney uses Mickey Mouse.”