Why Jana’s partnership with Travis Kelce could tip the balance and revive Six Flags’ business
Taylor Swift (left) and Travis Kelce are seen in New York City’s Meatpacking District on December 28, 2024.
StewartofNY | GC Pictures | Getty Images
Company: Six Flags Entertainment (FUN)
Business: Six Flags Entertainment It is a regional entertainment resort operator with approximately 27 amusement parks, 15 water parks and nine resorts in 17 states in the United States, Canada and Mexico. The company delivers unforgettable experiences to millions of guests each year through its portfolio of coasters, themed rides, exciting water parks, resorts, and intellectual properties including Looney Tunes, DC Comics, and Peanuts. The company’s parks include Hurricane Harbor Phoenix, California’s Great America, Knott’s Berry Farm, Knott’s Soak City Water Park, Six Flags Magic Mountain, Six Flags Discovery Kingdom, Six Flags Over Georgia, Six Flags White Water, Cedar Point Shores Water Park, Six Flags Great America, Six Flags Fiesta Texas, Hurricane Harbor Splashtown, Dorney Park & Wildwater Kingdom and others.
Stock Market Value: $2.60 billion ($25.63 per share)
Six Flags Entertainment’s stock year-to-date
Activist: Jana Partners
Ownership: ~9%
Average Cost: no
Activist Comment: Jana is a very experienced activist investor founded by Barry Rosenstein in 2001. They have made a name for themselves with well-designed plans for long-term value and deeply researched activist positions. Rosenstein called his activist strategy the “V cube.” The three “Vs” were: (i) Value: buying at the right price; (ii) Votes: knowing whether you have the right to vote before starting a proxy fight; and (iii) Various ways to win: having multiple strategies to increase value and exit an investment. Since 2008, they have gradually shifted this strategy to what we describe as the three “S” (i) Stock price – buying at the right price; (ii) Strategic activism – sale of the company or spin-off of a business; and (iii) Star advisors/candidates – collaborating with senior industry executives to advise them and sit on the board if necessary.
what’s going on
On October 21, Jana announced that it was partnering with Travis Kelce, Glenn Murphy, and Dave Habiger to invest in Six Flags Entertainment and plans to engage with the company’s board and management on opportunities to increase shareholder value and improve the guest experience.
behind the scenes
Six Flags Entertainment is a regional entertainment resort operator with approximately 27 amusement parks, 15 water parks and nine resorts in 17 states in the United States, Canada and Mexico. In November 2023, Six Flags announced it would merge with Cedar Fair. While this news drew backlash from some investors, particularly activist Land & Buildings, the merger was completed in July 2024. At the time, the merger seemed like an opportunity to combine Six Flags’ regional dominance in theme parks, strong licensing arrangements (such as a lifetime intellectual property agreement with Warner Brothers), and modern technology and pricing backbone with Cedar Fair’s operational discipline, best-in-class park experience, and high customer satisfaction rate. create synergy and increase Six Flags’ asset value.
But this arrangement didn’t actually go as planned. In the second quarter, Six Flags faced severe weather during the typical peak period of May through June, resulting in significant EBITDA and attendance losses. Moreover, the company entered this period with a significant advantage from the merger, and these failures exacerbated the company’s balance sheet problems in the eyes of investors. This caused Six Flags’ stock price to drop over 58% from the completion of the Cedar Fair merger to the day before Jana’s announcement.
Such stock movements in otherwise strong businesses, caused by an idiosyncratic event that is unlikely to repeat, such as weather, often attract the attention of good value investors. But Six Flags has other problems, including poor operational execution, integrating the Cedar Fair merger, and naming a new CEO, with the announcement that CEO Richard Zimmerman will step down at the end of 2025.
Jana Partners is now the fifth activist investor in this stock. Others include Sachem Head (4.82%), H Partners (4.59%), Dendur (4.38%) and Land & Buildings (n/a). All activists except L&B were represented on the board.
As is often the case, Jana comes with the All-Star team: Glenn Murphy, executive chairman petco and former chairman and CEO Openness; Dave Habiger, president reddit; and NFL Superstar Travis Kelce. The investment group has an economic stake of approximately 9% and plans to engage with Six Flags’ board and management team to explore ways to increase shareholder value and improve the guest experience.
Much of Jana’s campaign reflects concerns already voiced by other activists in the stock, including the company’s potential to create value by revitalizing the business as an independent company with a new CEO and/or monetizing real estate or even selling the entire company. Regardless of which plan is followed, the company needs to immediately begin the path of solving its operational problems.
Operationally, Six Flags missed a significant opportunity by failing to integrate its consumer-facing technology. More than a year after the merger, Six Flags still runs more than 10 different apps, and even basic transactions like purchasing season tickets from its website have become unreliable; hence modernizing and streamlining this technology could go a long way.
The company also needs to re-examine its operating strategy in the face of inclement weather and adopt a more disciplined capex framework. For example, despite bad weather in the second quarter, Six Flags kept its parks open more days in the quarter than in the same period last year, resulting in significant and unnecessary losses.
Jana also believes Six Flags has an opportunity to use its existing real estate to implement year-round extreme weather-proof experiences, such as indoor skydiving and trampoline parks.
Kelce cool factor
Next, the company needs to revitalize advertising and marketing. Six Flags is one of the most well-known entertainment brands, but its advertising has become stale, it has abandoned regional marketing efforts, and it has also missed an opportunity to expand its national scale. While the new CEO is likely to have good ideas in this area, having access to Travis Kelce, one of the world’s most popular and beloved celebrities across all demographics, is a valuable potential marketing asset. (For example, see what Sydney Sweeney already did this American Eagle only with one ad.)
Kelce hasn’t signed on as a brand ambassador or in any capacity other than a shareholder, but he’s a bonafide fan of theme parks like Six Flags, has already added advertising value to the company just by talking about it on his podcast, and there’s always the potential to do more with him unofficially or through some kind of deal. The revitalization of the brand, catalyzed by Kelce’s active involvement, presents a meaningful opportunity to increase attendance and participation at Six Flags.
JANA’s partnership with Mr. Kelce is unprecedented in two ways: 1) it pairs a world-famous celebrity with an activist who is personally invested in the company and uses their star power to amplify the company’s brand from the outside in a highly authentic way, and 2) he brings a perfectly designed solution to revitalize the company’s branding and marketing, reaffirming its cool factor and countering any concerns that weigh in on Six Flag’s brand appeal. solves. on the company floor.
Finally, and arguably most importantly, the ongoing CEO process presents a golden opportunity to recruit a world-class operator who can execute these initiatives. In the world of shareholder activism, there is no better opportunity to create value than for the activist to have a say in naming a new CEO for a great but struggling company.
With so many activists involved in this process, we would expect the new CEO to be a world-class operator with strong views on creating value for shareholders. Moreover, the board has been reconstituted over the past few years and the addition of Kelce as a potential official or unofficial brand ambassador could improve the quality of the candidate pool.
With all that said, a vacant CEO position is also an excellent time to explore strategic alternatives, and Jana still urges the company to consider the potential sale of underperforming parks and/or the entire company.
If Six Flags were to position itself for a sale, both private capital and strategic interest would likely be involved. ApolloFor example, it tried to buy Cedar Fair in 2010 before the merger went through due to lack of investor support, and Karataş It currently owns the Great Wolf Lodge, a complementary entity.
From a strategic perspective, the growing media and entertainment trend to integrate physical park assets into cross-platform media ecosystems makes the industry a logical candidate. Media giants love this Disney And comcast We have already provided the blueprint on how to leverage theme parks to promote intellectual property.
extraordinaryThe third peer of Disney and Comcast, interestingly enough, became the only park that was not a theme park after selling five Paramount Parks to Cedar Fair in 2006. This becomes even more interesting with Paramount making a $57 billion bid to buy it. Warner Bros Discovery. Six Flags has a licensing deal with Warner Brothers, and at its current market cap of $2.6 billion, it would be a logical addition to an acquisition by Paramount, or any strategic investor for that matter. (netflix also showed interest).
Jana is a highly experienced activist with a history of working with operators tailored to a company’s specific problems, and that’s exactly what they did here. Two corporate legends with consummate brand ambassadors and nearly unparalleled consumer and technology-based operational transformation expertise may be just the medicine needed here. With this in mind, we would normally argue that Jana has too large a shareholder base to be represented on the board because it already has six directors appointed pursuant to an activist agreement. However, we believe that activists who already have representatives on the board agree with Jana and would welcome directors of this caliber to help pursue a path they all agree on.
Ken Squire is the founder and president of 13D Monitor, a corporate research service on shareholder activism, and the founder and portfolio manager of the 13D Activist Fund, an investment fund that invests in a portfolio of activist investments.
Disclosure: Comcast is the parent company of NBCUniversal, which owns CNBC. Versant would become CNBC’s new parent company, based on Comcast’s planned Versant spinoff.
