The board of directors of Six Flags Inc. yesterday said it plans to put the company up for sale, raising the stakes in its ongoing battle with Redskins owner Daniel M. Snyder for control of the struggling theme park company.
In filings with the Securities and Exchange Commission, Six Flags chief executive Kieran E. Burke urged shareholders to reject Snyder's recent request to oust management and replace it with his own slate of executives. Snyder wants shareholders to install him as chairman, outgoing ESPN programming executive Mark Shapiro as chief executive and home builder Dwight C. Schar as a director.
The Six Flags board yesterday went on the offensive, saying that Snyder's plans to revive the company's fortunes were vague and that neither he nor Shapiro has the right experience to "understand the unique characteristics of the theme park business."
Snyder yesterday told associates that he plans to continue his bid to unseat management, according to sources who spoke on the condition that they not be identified because of the sensitive nature of the subject.
The Six Flags board said Shapiro would have "divided loyalties" because Snyder recently hired him to be chief executive of Red Zone LLC, the investment vehicle for his Six Flags shares. The Six Flags board said Shapiro will have "financial incentives to act to benefit Red Zone and Mr. Snyder, regardless of whether his actions also benefit the Company and its stockholders."
Snyder last week said he was seeking to increase his 11.7 percent stake to 34.9 percent as a means of taking control of the firm, short of buying it, which would entail assuming the company's more than $2 billion debt.
The board yesterday told shareholders that Snyder in effect was trying to take over the company without having to pay full price for it. As a result, Six Flag's seven directors unanimously agreed to put the company up for auction to pressure Snyder to either pay more or back down, analysts said.
"We view this as an attempt by Six Flags to force Mr. Snyder to enter the auction process and buy the full company," Katherine Styponias, an analyst with Prudential Equity Group LLC, wrote yesterday in a research note.
Six Flags' board said yesterday in a news release that should Snyder have "a serious interest" in buying the company, he would be invited to participate in the auction.
Some observers, however, read the board's move as a sign of desperation. "They realize they are at a point of no return, and they want to get the biggest pay day they can get," said Dennis L. Speigel, president of International Theme Park Services Inc., a consulting firm.
Whether the Six Flags board will find anyone willing to fork over a sum closer to the company's estimated value of $3 billion remains to be seen, analysts said.
The list of potential buyers is small. Media companies such as Viacom Inc., which owns Paramount Parks Inc., and Walt Disney Co. have lately shown little interest in plowing money into theme parks, analysts said. They would rather invest in faster-growing businesses such as Internet and cable, Styponias said in her note.
Smaller theme park companies such as Ohio's Cedar Fair LP might be interested in snapping up individual parks but cannot afford to buy all of Six Flags, analysts and company officials said.
That leaves private equity firms, several of which have recently begun buying theme parks in Europe.
The most oft-cited private equity candidate to buy Six Flags is the Blackstone Group LP, which owned Six Flags in the early 1990s. Earlier this year, Blackstone outbid two other private equity firms to buy four Legoland parks in the United States and Europe for $457 million. The firm also owns another European theme park company, Merlin Entertainments.
But while buyout funds are flush with money and in search of assets, analysts yesterday said Six Flags would be a tough sell for them, too.
"It would be difficult to justify the purchase," Styponias said in her note.
"It's not a no-brainer," said R. Glen Reid, a Bear Stearns analyst.
The main obstacle to a sale, many observers contend, is the company's $2.1 billion debt. When combined with the company's poor performance in recent years, the debt load "is the big challenge," Reid said. "How do you get yourself out from underneath that?"
A source close to Red Zone who spoke on condition of anonymity, citing the sensitive stage of the process, agreed with Reid, saying the company has not generated enough cash in recent years to make financing the debt feasible.
A source close to Six Flags who also spoke on condition of anonymity, citing the same reasons, countered that the debt would probably not be an issue and noted that the bond market reacted favorably yesterday to news of a possible sale of Six Flags.
The auction of Six Flags comes about a year after Snyder bought his first Six Flags shares and began complaining to the board about the company's poor performance.
Six Flags' revenue and stock price have declined in recent years along with attendance at its parks. Six Flags management blamed poor weather and tough economic conditions after the terrorist attacks of Sept. 11, 2001, though the company has rebounded somewhat this year.
In his filing last week, Snyder said his team could do a better job of running the company and make more money for shareholders by applying strategies he has used at FedEx Field.
He needs to persuade only a handful of large shareholders to go along with him to oust management.
Analysts say the pool of potential buyers for Six Flags is small.