Redskins owner Daniel M. Snyder's bid to take control of Six Flags Inc. got a boost yesterday from the nation's biggest shareholder-advisory firm.
Rockville-based Institutional Shareholder Services Inc. recommended that Six Flags shareholders vote to replace three management-backed directors with a Snyder-backed slate, adding momentum to the dissidents' campaign for control of the company.
ISS's recommendation to replace directors is unusual because it comes when Six Flags has already put itself up for auction, a process that stockholders are usually loath to disrupt. Also, a sale would typically result in the removal of current management.
In its report, ISS said Six Flags' "poor long-term performance" combined with the dissidents' "strong track record establish both the need for change and the dissidents' ability to effect positive change."
More than 70 percent of Six Flags' shares are controlled by seven investors, including Snyder, who owns about 11.7 percent and needs a majority vote to succeed. Earlier this month, New York investor Simon Glick, who owns about 9.8 percent of Six Flags, said in a filing with the Securities and Exchange Commission that he intended to vote for the Snyder ticket. Other major investors include Omaha fund manager Wallace R. Weitz, who controls about 10.6 percent of the shares, and Microsoft Corp. founder Bill Gates, who owns 11.5 percent.
In a written statement, Six Flags, based in New York, said it was "obviously disappointed" with ISS's support for the Snyder-led dissidents, the investor group Red Zone LLC, but added that "we appreciate the ISS's recognition that the company's sale process could result in full and fair value being received by Six Flags stockholders."
Mark Shapiro, a former ESPN executive and one of the Red Zone nominees, said the group was pleased with the recommendation. It "validates our views as to what is in the best interests of Six Flags stockholders," he said in a written statement.
Some pension fund managers among the Six Flags shareholders expressed puzzlement with the ISS recommendation to replace directors now, saying that shareholders could always replace them after the auction.
"Why not give the company a chance to complete the auction?" said a pension fund manager, who spoke on the condition of anonymity because of sensitivity regarding trading rules.
Another fund manager agreed that a better strategy would be to "see if the company is successful at auction." The manager added: "If they are successful, then great. If they're not, we will give our consent to Red Zone then."
ISS's clients include more than 1,000 institutional investors, including some of the nation's largest. Its recommendation has been particularly anticipated in the Six Flags fight, which could be decided by a small number of votes.
In its recommendation, ISS said it doesn't think that electing the dissident slate "would materially disrupt the sales process," and that it might help get a better price.
Snyder approached the Six Flags board last year to demand that the company, which has suffered from poor attendance and lackluster marketing, take steps to improve its lagging stock performance. The two sides disagree on the content of meetings, but ultimately Snyder proposed to replace two top managers and one director with himself, Shapiro and local home builder Dwight C. Schar.
Six Flags' share price jumped after Red Zone made a public offer over the summer for a block of shares at $6.50 each, then rose again in October after management announced that it would put the company up for sale.
Six Flags stock closed unchanged yesterday at $7.32 a share.
Staff writer Thomas Heath contributed to this report.