Cedar Fair Completes Knott’s Deal

Ending an era of family ownership, Knott’s Berry Farm was acquired Monday for $245 million by Cedar Fair, an Ohio-based amusement company that is expected to add more thrill rides at the nation’s first theme park so it can better compete against larger rivals.

The purchase price, about twice Knott’s annual revenue, was a lower ratio than some other recent acquisitions in the industry, analysts said. But the trade-off is that Knott family members will retain influence in a well-regarded company that has reinvested more than $230 million in its properties over the past decade.

“I think it makes a lot of sense for Cedar Fair; they got a good price,” said Steven Bernard, vice president of Everen Securities Inc., a Chicago-based brokerage firm that follows Cedar Fair. He noted that the company is well-known for installing roller coasters.

“They know how to run a good theme park. They should be able to add to the mix of rides, generating higher attendance. And they’ll get some better economies of scale, improving profit margins by eliminating duplication,” he said.

Cedar Fair is a publicly traded partnership on the New York Stock Exchange that owns theme parks Cedar Point, located on Lake Erie between Toledo, Ohio, and Cleveland; Valleyfair near Minneapolis; Dorney Park & Wildwater Kingdom near Allentown, Pa.; and World of Fun and Oceans of Fun in Kansas City, Mo. Its stock closed at $25.69, down 19 cents per share on 29,900 shares traded.

Knott’s, based in Buena Park, represents Cedar Fair’s first year-round theme park, and competes against other attractions in Southern California such as Universal Studios Hollywood and Disneyland that can afford to pay $100 million for a single ride.

In fact, Disneyland plans to open its new “gate,” California Adventure, at its Anaheim park in 2001 at an estimated cost of $1.4 billion.

There are no changes planned for Knott’s this year, including the admission price, executives said, and plans remain on track for a new wooden roller coaster, expected to be a major attraction when it opens in 1999 at a reported cost of $24 million.

“It has been our practice to invest heavily in our parks, and to continue what has been established,” said Cedar Fair spokesman Brian Witherow, who added that $38 million would be spent on Cedar Fair’s other properties this year.

“The park is in great shape physically, and it’s a great draw. It’s different from our other parks in there are not as many thrill rides,” he said.

Cedar Fair’s purchase price, which was the company’s biggest since going public in 1987, consisted of $95 million in cash. Added to that were 6.4 million limited partnership units, valued at $23.34 per share, for a total of $150 million.

With that combined block of units, Knott family members enjoy the largest controlling interest in Cedar Fair. Knott’s will be managed by Jack Falfas, who was vice president of operations at Cedar Point.

“They’re very pleased in their search for a strategic partner,” said Terry Hackett, a Knott family representative who was placed on the board of directors of Cedar Fair Management Co. “They believe Cedar Fair will do well, and that the companies complement each other a great deal.”