Six Flags' big investors unamused by stock slide

September 05, 2004|By Jay Hancock

ALMOST ANY business is a good business at the right price.

Six Flags Inc., the national theme-park operator with an operation in Largo, suffers strategic befuddlement, enormous debt, declining attendance and five straight years of losses. But at an 85 percent markdown, its stock is fetching attention from the Potomac to the Puget.

Washington Redskins owner Dan Snyder sank some $34.5 million into the company last month, even as cool weather and high gas prices continued to hurt its results. Snyder may agitate things by seeking a seat on the board or pushing for a merger, his investment company said last week.

Microsoft's Bill Gates is also gunning for change at Six Flags, and he has even more motivation. Gates put $160 million into Six Flags common and preferred stock, but unfortunately for him he bought at far higher prices.

Six Flags has plummeted from more than $40 a share in 1999 to a close of $5.76 last week.

Gates has "become increasingly dissatisfied with the financial performance" of Six Flags, his investment managers said last week. No kidding. His stake is worth some $70 million these days - a nice, 50 percent-plus loss.

Gates, too, may try to nominate a board member or ally with other shareholders to goose Six Flags' management, his company said.

Gates owns 11.5 percent of the company. Snyder owns 8.8 percent. Check the phone lines from Washington to Seattle this fall.

What can a billionaire computer geek and an egotistical football tycoon offer an amusement company that's a few ponies short of a merry-go-round?

Plenty, say industry pros.

"You don't have good themes in these parks anymore," says Gary Slade, publisher of Amusement Today, a monthly trade newspaper based in Arlington, Texas. "They've got to improve customer service. They've got to continue to improve their grounds quality - keeping the place clean, keeping it looking new, fixed-up, painted."

Times have been tough for theme parks since the Sept. 11, 2001, terrorist attacks, and many companies have struggled. A relatively cool and wet summer hasn't helped.

But "Six Flags has some issues that it's dealing with that are not normal for the amusement park operator," as industry consultant Angus Jenkins delicately puts it. "I believe that they have lost a lot of public appeal just through the nature of reduced theming."

People don't know what Six Flags parks are about anymore, in other words.

The Largo park, south of Baltimore, is a hodgepodge of comic-book themes, Western motifs and water rides.

Its Batman and Superman rides evoke ancient pop culture. And the Maryland Six Flags and other parks in the chain have tried too hard to attract teens with thrill rides and ignored their parents, experts say.

With the number of U.S. teens setting record highs, "that is the market you need to get," Slade says. "The problem is, if you get them there as a family, Mom and Dad are going to get bored if there's 13 roller coasters and nothing else to do."

And too many unsupervised teens scare off parents with little kids. "This is not a demographic that is synergistic with families," says Jenkins, president of Leisure and Recreation Concepts of Dallas.

For the year to date through June, Six Flags' companywide attendance was down 4.1 percent compared with the first half of 2003. For July, attendance fell 3.3 percent.

Reversing the slide won't be easy. The company, which booked revenue of $1.2 billion last year, owes lenders more than $2 billion and pays out $200 million in interest each year. That'll make it hard to afford capital projects to spruce up the parks.

But Slade thinks Snyder might be able to juice revenue anyway. Marketing pro Snyder knows how to use nontraditional avenues to promote his causes. Slade counts at least 13 cities with NFL franchises that are near Six Flags properties and suggests there could be some sort of cross-promotion.

At Friday's close of $5.76, Six Flags' stock sells for only two-thirds book value. Measured by sales per share, it's a sixth as cheap as competitor Cedar Fair, operator of Pennsylvania's Dorney Park and other theme destinations.

Snyder's betting it won't stay that way.

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