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Six Flags Entertainment Corporation (FUN) Risk Analysis
Risk Overview Q1, 2024
Risk Change Over Time
- Share Price & Shareholder Rights - Risk 1Our non-U.S. unitholders will be subject to withholding in the exchange of partnership units for the successor merged company stock and the applicable withholding agent may satisfy such withholding by retaining shares of the successor merged company stock or cash or other property of our non-U.S. unitholder.
Our non-U.S. unitholders are taxed by the U.S. on income effectively connected with the conduct of a U.S. trade or business, unless exempted or further limited by an income tax treaty. Each non-U.S. holder is considered to be engaged in business in the U.S. because of their ownership of our units. Furthermore, it is probable that such non-U.S. holders are deemed to conduct such activities through permanent establishments in the U.S. within the meaning of applicable tax treaties. Treasury Regulations under Section 1446(f) of the Code provide that the broker effecting the transfer of a unitholder's interest in a publicly traded partnership engaged in a U.S. trade or business, such as the Partnership, is required to withhold 10% of the amount realized, even if the exchange otherwise qualified for nonrecognition treatment for U.S. federal income tax purposes. Our non-U.S. holders should expect to have the applicable withholding agent withhold 10% of the gross proceeds received by the non-U.S. unitholder, and the applicable withholding agent may satisfy such withholding by withholding shares of the successor merged company or cash or other property of the non-U.S. unitholder.
- Share Price & Shareholder Rights - Risk 2Even if the merger otherwise qualifies for tax-free treatment, a unitholder will recognize taxable gain upon the exchange of units if and to the extent that the aggregate amount of our liabilities attributable for tax purposes to the units exchanged by the unitholder exceeds the unitholder's aggregate tax basis in the units exchanged.
It is intended that, for U.S. federal income tax purposes, the merger qualify as a transaction described in Section 351 of the Code pursuant to which generally no gain or loss is recognized. However, even if the merger qualifies as a transaction described in Section 351 of the Code, under Section 357(c) of the Code, if a corporation assumes or is treated for U.S. federal income tax purposes as having assumed liabilities of the transferor or accepts property subject to liabilities in an exchange described in Section 351 of the Code, the transferor generally must recognize taxable gain in the amount by which the liabilities exceed the transferor's basis in the property contributed to the corporation. Under Section 752 of the Code, the liabilities of the Partnership are allocated to its unitholders and as a result of the merger, the liabilities allocated to the unitholders will be treated as having been assumed by the successor combined company and will be subject to Section 357(c) of the Code. Accordingly, a unitholder will recognize taxable gain upon the exchange of units in the merger if and to the extent that (i) the aggregate amount of the Partnership liabilities attributable to the units exchanged by the unitholder exceeds (ii) the unitholder's aggregate tax basis in the units exchanged by such unitholder.
- Share Price & Shareholder Rights - Risk 3Our unitholders as of immediately prior to the merger will have reduced ownership in the combined company.
Following the closing of the proposed merger, Six Flags' existing stockholders are expected to own approximately 48.8% of the issued and outstanding shares of the combined company and our existing unitholders are expected to own approximately 51.2% of the issued and outstanding shares of the combined company, in each case on a fully diluted basis. As a result, existing Cedar Fair unitholders will have less influence on the policies of the combined company than they currently have on the policies of Cedar Fair.
- Share Price & Shareholder Rights - Risk 4The market price of the combined company's common stock following the closing of the merger may be affected by factors different from those that historically have affected or currently affect our units.
Upon completion of the merger, the combined company's financial position may differ from each of Six Flags' and Cedar Fair's financial positions before the completion of the merger, and the results of operations of the combined company may be affected by factors that are different from those currently affecting the results of operations of each of Six Flags and Cedar Fair. Accordingly, the market price and performance of the combined company's common stock is likely to be different from the performance of our units prior to the closing of the merger.
- Accounting & Financial Operations - Risk 5Declaration, payment and amounts of dividends, if any, distributed to stockholders of the combined company will be uncertain.
Although we have paid cash distributions on our units in the past, the combined company board may determine not to declare dividends in the future or may reduce the amount of dividends paid in the future. Any payment of future dividends will be at the discretion of the combined company board and will depend on the combined company's results of operations, financial condition, cash requirements, future prospects and other considerations that the combined company board deems relevant.
- Debt & Financing - Risk 6The Amendments, as defined in Note 6 of the Consolidated Financial Statements, becoming operative and payment of the Consent Payment, as defined in Note 6 to the Consolidated Financial Statements, in connection with the Consent Solicitation, as defined in Note 6 to the Consolidated Financial Statements, with respect to our bonds may result in our unitholders being allocated cancellation of debt income (CODI) for U.S. federal income tax purposes.
In connection with the Consent Solicitation with respect to our bonds, the Amendments may become operative and certain holders of our bonds may receive the Consent Payment as described in Note 6. We intend to take the position that the Amendments becoming operative for any series of our bonds would not result in a significant modification or the Partnership recognizing CODI for U.S. federal income tax purposes. However, such position is not free from doubt. Payment of the Consent Payment in connection with the Consent Solicitation may result in a "significant modification" of one or more series of our bonds as determined for U.S. federal income tax purposes, and therefore, a deemed exchange of old bonds for new bonds. If one or more series of our bonds were to undergo such a significant modification, the Partnership may recognize CODI, which would be allocated and taxable to our unitholders. We are not able to calculate whether the payment of the Consent Payment will result in a significant modification or the amount of CODI, if any, that would be allocated and taxable to our unitholders until the Consent Payment is paid, which is expected to occur, if at all, upon or immediately prior to consummation of the merger.
- Corporate Activity and Growth - Risk 7The proposed merger with Six Flags and integration of both companies may be more difficult, costly or time-consuming than expected, and we may fail to realize the anticipated benefits of the merger.
The success of the proposed merger with Six Flags will depend in part on our ability to realize anticipated revenue and cost synergies and on our ability to successfully integrate the businesses. If we are not able to successfully achieve these objectives, the anticipated benefits of the merger may not be realized fully, or at all, or may take longer to realize than expected. In addition, our ability to achieve the goals for the proposed merger may be affected by future prospects, execution of business strategies, and our ability to manage the various factors discussed within this report, including within the forward-looking statements. The actual benefits of the proposed merger also could be less than anticipated if, for example, completion of the merger and/or integration of the businesses are more difficult, costly or time-consuming than we expect.
- Corporate Activity and Growth - Risk 8The announcement or completion of the proposed merger may disrupt and/or harm our current plans and operations or those of Six Flags, may divert management's time and attention and may affect existing business relationships, any of which may impact financial performance, operating results and/or our ability to achieve the benefits of the merger.
The announcement or completion of the proposed merger may disrupt and/or harm our current plans and operations and/or those of Six Flags. Management's time and attention also may be diverted on transaction-related issues. There also may be adverse reactions to or changes in business relationships as a result of the announcement or completion of the merger. Any of these factors could affect our and/or Six Flags' financial performance or operating results, and/or could impact our ability to achieve the benefits of the merger.
- Corporate Activity and Growth - Risk 9The merger agreement limits Cedar Fair's ability to pursue alternative transaction proposals, which may discourage other companies from making a favorable alternative transaction proposal.
The merger agreement contains certain provisions that restrict Cedar Fair's ability to solicit, initiate or knowingly encourage (including by way of furnishing information), or take any other action designed to facilitate, any inquiries regarding, or the making of, any proposal the consummation of which would constitute an "Alternative Transaction", which includes, among other things: any transaction or series of transactions which result in the acquisition of more than 20% of the outstanding equity or voting power of Cedar Fair; any merger, consolidation, share exchange or similar transaction resulting in the acquisition or, or acquisition of control over, assets or business representing 20% or more of the consolidated revenues, net income or assets of Cedar Fair; or any transaction resulting in the disposition of assets representing 20% or more of the consolidated revenues, net income or assets of Cedar Fair (each such transaction or series of transactions, an "Alternative Transaction"). Additionally, Cedar Fair is subject to restrictions on its ability to participate in any discussions or negotiations, or cooperate with any third parties with respect to any inquiries regarding, or the making of, any proposal the consummation of which would constitute an Alternative Transaction. These provisions could discourage a potential third-party acquirer or other strategic transaction partner that might have an interest in acquiring all or a significant portion of Cedar Fair from considering or pursuing an Alternative Transaction.
- Corporate Activity and Growth - Risk 10The merger agreement may be terminated in accordance with its terms, and the merger may not be completed, which could negatively impact our business, financial results, and/or unit price.
The merger agreement is subject to a number of conditions which must be satisfied or waived in order to complete the merger, including approval of Six Flags' stockholders. If the merger is not completed or is delayed for any reason, there may be adverse consequences and we may experience negative reactions from investors, the financial markets, our customers, our vendors and/or our employees.
Risk Highlights Q1, 2024
Risk Word Cloud
Risk Factors Full Breakdown - Total Risks 37
- Share Price & Shareholder Rights - Risk 1The market price of the combined company's common stock following the closing of the merger may be affected by factors different from those that historically have affected or currently affect our units.
Upon completion of the merger, the combined company's financial position may differ from each of Six Flags' and Cedar Fair's financial positions before the completion of the merger, and the results of operations of the combined company may be affected by factors that are different from those currently affecting the results of operations of each of Six Flags and Cedar Fair. Accordingly, the market price and performance of the combined company's common stock is likely to be different from the performance of our units prior to the closing of the merger.
- Share Price & Shareholder Rights - Risk 2Our unitholders as of immediately prior to the merger will have reduced ownership in the combined company.
Following the closing of the proposed merger, Six Flags' existing stockholders are expected to own approximately 48.8% of the issued and outstanding shares of the combined company and our existing unitholders are expected to own approximately 51.2% of the issued and outstanding shares of the combined company, in each case on a fully diluted basis. As a result, existing Cedar Fair unitholders will have less influence on the policies of the combined company than they currently have on the policies of Cedar Fair.
- Share Price & Shareholder Rights - Risk 3Even if the merger otherwise qualifies for tax-free treatment, a unitholder will recognize taxable gain upon the exchange of units if and to the extent that the aggregate amount of our liabilities attributable for tax purposes to the units exchanged by the unitholder exceeds the unitholder's aggregate tax basis in the units exchanged.
It is intended that, for U.S. federal income tax purposes, the merger qualify as a transaction described in Section 351 of the Code pursuant to which generally no gain or loss is recognized. However, even if the merger qualifies as a transaction described in Section 351 of the Code, under Section 357(c) of the Code, if a corporation assumes or is treated for U.S. federal income tax purposes as having assumed liabilities of the transferor or accepts property subject to liabilities in an exchange described in Section 351 of the Code, the transferor generally must recognize taxable gain in the amount by which the liabilities exceed the transferor's basis in the property contributed to the corporation. Under Section 752 of the Code, the liabilities of the Partnership are allocated to its unitholders and as a result of the merger, the liabilities allocated to the unitholders will be treated as having been assumed by the successor combined company and will be subject to Section 357(c) of the Code. Accordingly, a unitholder will recognize taxable gain upon the exchange of units in the merger if and to the extent that (i) the aggregate amount of the Partnership liabilities attributable to the units exchanged by the unitholder exceeds (ii) the unitholder's aggregate tax basis in the units exchanged by such unitholder.
- Share Price & Shareholder Rights - Risk 4Our non-U.S. unitholders will be subject to withholding in the exchange of partnership units for the successor merged company stock and the applicable withholding agent may satisfy such withholding by retaining shares of the successor merged company stock or cash or other property of our non-U.S. unitholder.
Our non-U.S. unitholders are taxed by the U.S. on income effectively connected with the conduct of a U.S. trade or business, unless exempted or further limited by an income tax treaty. Each non-U.S. holder is considered to be engaged in business in the U.S. because of their ownership of our units. Furthermore, it is probable that such non-U.S. holders are deemed to conduct such activities through permanent establishments in the U.S. within the meaning of applicable tax treaties. Treasury Regulations under Section 1446(f) of the Code provide that the broker effecting the transfer of a unitholder's interest in a publicly traded partnership engaged in a U.S. trade or business, such as the Partnership, is required to withhold 10% of the amount realized, even if the exchange otherwise qualified for nonrecognition treatment for U.S. federal income tax purposes. Our non-U.S. holders should expect to have the applicable withholding agent withhold 10% of the gross proceeds received by the non-U.S. unitholder, and the applicable withholding agent may satisfy such withholding by withholding shares of the successor merged company or cash or other property of the non-U.S. unitholder.
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