One Year In: Assessing the Six Flags–Cedar Fair Merger
Deep dive into the merger that created the largest regional theme park operator in North America
I recently took a look at Six Flags Entertainment Corp, FUN 0.00%↑. Taking a look at the stock brought back fond memories of many summer days at Six Flags Astroworld in Houston, TX where I grew up. While the stock at first glance didn’t really come close to passing my quality test, I found it an interesting idea at face value given its hard-to-replace asset base and its recent merger with Cedar Fair.
Six Flags stock is down nearly 50% from its recent peak in July 2024 at the time of the merger. The merger came with a significant debt load. The combined company is now carrying net debt/EBITDA of roughly 5.7x based on actual 2024 results, which is an alarmingly high figure for a consumer discretionary business with heavy seasonality.
It reminded me of the Eldorado acquisition of Caesars Entertainment back in 2019/2020. I was working in equity research at the time and remember wondering how a deal that leaned so heavily on debt, about 6x leverage at transaction close, slightly more than Six Flags today, would play out.
While the structure of each deal differs (merger of equals vs. leveraged acquisition), they share some surface-level similarities:
Both operate in consumer discretionary categories, highly sensitive to economic cycles
Both deals created the largest regional player in their category overnight
Both involved around six turns of leverage, leaving little room for error
Initially, I thought there might be a pretty clean comparison to make, but Caesars had to execute through a pandemic and a post-COVID surge, which gave it a very abnormal backdrop. The company initially managed to bring leverage down thanks to:
Asset sales, including:
MontBleu in Lake Tahoe
Tropicana Evansville and Caesars Southern Indiana
Its entire UK and Africa casino portfolio (formerly London Clubs International), among others
EBITDA recovery, driven by post-pandemic demand
Operational efficiency, including cost cuts and synergy realization
The stock responded accordingly, rallying from around $35 at the close of the deal to nearly $115 within a year. But since then:
EBITDA has stalled
Operating costs have climbed
Net debt remains elevated, with leverage now back near 7x
The stock has fallen to $28 as of this writing
So while these are different businesses in different environments, the core question remains: can a consumer-facing company, carrying this high of a debt burden, execute its way out?
One year in, the Six Flags–Cedar Fair merger is showing some early wins and some real cracks. The stock is down nearly 50%. Is this a turnaround in the making or a trap?