Six Flags for sale - Minimum impact expected for Marine World

August 26, 2005

Six Flags for sale
Minimum impact expected for Marine World

By MATTHIAS GAFNI, Times-Herald staff writer and Associated Press

NEW YORK - Six Flags Inc. on Thursday said its board unanimously decided to put the company up for sale through an auction process, one week after Washington Redskins owner Dan Snyder bid to raise his stake in the amusement park operation.

Local officials said the sale, if finalized, would likely cause minor ripples at the Vallejo Six Flags Marine World park.

"I don't think it's a negative thing at all," Vallejo City Manager Roger Kemp said Thursday. "There are 30 theme parks throughout America and we're one of the more profitable places É I think we're helping the stock go up in Vallejo."

Shares of Six Flags, the world's second largest theme-park operator behind Disney, rose 8.6 percent to $7.10 in early trading on the New York Stock Exchange. At that price, the company's market capitalization is roughly $661 million.

Six Flags said it would invite dissident shareholder Red Zone LLC - an investment firm controlled by Snyder - to participate in the auction. But it also said it opposed Snyder's attempt to gain control of the company through a tender offer for Six Flags stock.

If Snyder's company gained control, Kemp said he would alert the Vallejo City Council, who basically would have to approve a new signee to the lease.

"For the most part, I think it would be the same staff and same operation there," Kemp said.

Kemp received a call Thursday from park General Manager Bill Davis, who alerted him of the news. Kemp forwarded a news article to council members to keep them abreast.

The city still owns the park and earlier this year gave Oklahoma City-based Six Flags a five-year extension to its option to buy the facility for an estimated $52 million. Kemp said it's unclear how a change in the park operator would affect a potential sale.

"If at some point someone would want to approach us and the price was right, the council would objectively consider the offer," Kemp said.

Marine World officials said they intended to purchase the park at some point during the five-year option.

Marine World spokesman Paul Garcia said Thursday it was premature to speculate how any change in companies would affect such a sale.

"I think right now it's too early to tell. Right now it's a companywide matter with all 30 parks," Garcia said.

Under the current arrangement, Six Flags runs the park and shares its profits with the city - roughly $2 million a year. If the city sells the park, it would relieve itself of debt and receive an operation fee of about $750,000 annually.

Vallejo officials can only watch the takeover bid.

Last Thursday, Snyder's Red Zone said in a letter to shareholders it sought to boost its stake to 34.9 percent from a current 11.7 percent, and would offer $6.50 per share - valuing the entire Six Flags company at about $605.2 million. However, the tender offer is contingent upon the replacement of Burke and Chief Financial Officer James Dannhauser.

Six Flags said putting itself up for sale was "the best way to deliver full and fair value" to shareholders, particularly given Red Zone's proposal, which it called an attempt to wrest control of the company without providing value to all shareholders.

Under Snyder's plan, Mark Shapiro - former programming and production executive at Walt Disney Co. and ESPN - would become CEO of Six Flags, while Snyder would become chairman. Snyder has also proposed increasing the number of board members.

In order to avoid triggering Six Flags' "poison pill" plan - a provision companies use to avoid hostile takeover battles - Snyder has sought only to boost his stake in the company and hasn't bid for full ownership. His proposals must be supported by half of the company's shareholders in order to circumvent the poison pill rules.

Six Flags' stock price has vaulted nearly 37 percent since Red Zone first disclosed its intent to raise its stake in the company.

Six Flags reported a profit in its second quarter ended in June, but has posted annual losses since 1999.

- E-mail Matthias Gafni at mgafni@thnewsnet.com or call 553-6825.