Value Investing Weekly

M&A/LBO activity over the past two years has run rampant to the delight of bankers across the country, and it seems that the trend is continuing into the New Year. This weeks issue will focus on current deals that have taken place and the impact on the investor.

Six Flags theme parks sold off a total of seven parks to a private equity firm for a price tag of $312 million. Financing will be in the form of $275 million in cash, and a receivable note of $37 million. Six Flags have struggled in prior years as the overall brand has suffered in image, as well being overwhelmed with debt obligations that amount to over $2 billion. Therefore, the new owner will change the names of the two of the seven parks that still have the Six Flags nameplate at the front of their park. Six Flags will still maintain thirty parks in their portfolio.

So what does this mean for the investor in Six Flags? It seems that this company is grasping for one last breath before their mighty debt drags them down. The fact is that even after selling these locations, the company is still in dire need to restructure and refocus on how to overcome this adversity. It is unclear where the company is headed, but bankruptcy reorganization cannot be ruled out.

eBay buys StubHub(pending approval) for $310 million which proved music to eBay shareholders as the stock closed up over 3%. StubHub is the explosive web site that allows buyers and sellers to connect to sell sport, concert, and theater tickets. eBay as well allows ticket sales on their auction web site, but competition between the two has grown significantly.

This move by eBay seems to make sense, as for a small premium they eliminate a competitor. Ticket sales have become one of the hot segments of internet auction selling, as consumers are able to buy and sell their own and eliminate the hefty premium associated with brokers.

These deals are just the tip of the iceberg of what we will see this coming year. It will be extremely interesting to follow the deals that work, and the ones that don’t. ValueInvesting Weekly will continue to keep you informed of the details of such transactions.

 


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