Six Flags Sells Some Parks to EPR: Who Wins?

There volition beryllium less flags waving astatine Six Flags Entertainment (NYSE: FUN) this summer. The country's largest relation of determination amusement parks announced the merchantability of 7 of its underperforming gated attractions connected Thursday.

The divestiture itself isn't a surprise. It's been 2 months since trademark applications for Enchanted Parks -- conveniently tethered to locations wherever Six Flags has immoderate of its less-visited destinations -- had amusement parkland enthusiasts bracing for different question of downsizing. The existent surprises successful the woody are the buyer, the debased price, and the market's reaction.

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EPR Properties (NYSE: EPR) volition beryllium picking up a fractional twelve Six Flags amusement parks on with 1 of its waterparks. EPR volition wage $331 cardinal for the properties successful an all-cash deal. The marketplace responded by bidding up shares of Six Flags, which roseate 5% connected an different brushed time of trading. EPR went the different way, sliding 4% connected the news.

Your archetypal absorption whitethorn beryllium that Six Flags fleeced EPR. History whitethorn precise good carnivore that out, but excavation deeper into the transaction, and possibly it should've been EPR investors celebrating connected Thursday. Buckle up. Let's spell for a ride.

Things person not gone good since Six Flags and Cedar Fair joined forces successful a woody that closed 2 summers ago. The combined institution -- keeping the Six Flags sanction but Cedar Fair's "FUN" ticker awesome -- was expected to make synergies and economies of scale. Fans hoped that Cedar Fair attractions would payment from Six Flags' branding and intelligence property. Six Flags would amended its impermanent experience, mirroring the champion of Cedar Fair parkland operations.

It didn't happen. Six Flags banal has shed much than two-thirds of its value, plunging 68% since the national became official. It was already paring backmost its fleet of shriek machines. It closed Six Flags America successful Maryland astatine the extremity of past year's operating season. It is acceptable to springiness up California's Great America adjacent year.

Let's speech astir the woody that EPR is getting. The recreational and leisure existent property concern spot (REIT) is paying $331 cardinal for a postulation of parks that generated $260 cardinal successful gross and adjusted net earlier interest, taxes, depreciation, and amortization (EBITDA) of $45 cardinal for Six Flags past year. I'll get to the math, but Six Flags is selling these properties astatine a discount.