27 slides from Six Flags Entertainment's proxy contest presentation, Dec 23, 2010
Slide 1: Cedar Fair Special Meeting January 11, 2011
Cedar Fair Special Meeting January 11, 2011 The Q Investments Partnership Resolutions 1
Slide 2: Agenda
Agenda Background Information The Q Investments Proposals Responses to the Company's Proxy Statement Summary and Closing Remarks 2
Slide 3: #1. Background Information
#1. Background Information Q Investments and Cedar Fair. Proposed Transaction with Apollo. 3
Slide 4: Q Investments and Cedar Fair
Q Investments and Cedar Fair: Q Investments made its initial investment in Cedar Fair over a year ago. Q believed there was significant value inherent in Cedar Fair's units despite the fact that management had recently cut the distribution. It was apparent that the company had suffered recent market
Slide 5: Proposed Transaction with Apollo
Proposed Transaction with Apollo: Transaction announced on 12/16/09 for $11.50 per unit. Offer represented what Q argued was a "bargain basement" price struck during one of the worst economic climates ever. Q ran a "Just Vote No" campaign against the proposed transaction and received overwhelming su
Slide 6: #2. The Q Investments Proposals
#2. The Q Investments Proposals Proposal Number One: Separation of the Chairman and Chief Executive Officer. Proposal Number Two: Increased Priority on Dividend Distribution. 6
Slide 7: Proposal #1: Separation of the Chairman and Chief Executive Officer
Proposal #1: Separation of the Chairman and Chief Executive Officer. Having an Independent Chairman is especially important when hiring a new CEO. A separate Chairman provides Independent oversight. Questionable Decisions due to self-admitted lack of financial expertise by Mr. Kinzel. Country Club A
Slide 8: Having an Independent Chairman is especially important when hiring a new CEO
Having an Independent Chairman is especially important when hiring a new CEO. Combined Chairman/CEO would be overseeing the process to pick his or her successor. When hiring a New CEO, the company may not attract the best candidates without an independent Chairman, especially given the current Chair
Slide 9: A separate Chairman provides independent oversight
A separate Chairman provides independent oversight. A Chairman is responsible for overseeing many aspects of the company's business and affairs. Mr. Kinzel is a skilled operator of theme parks. However, Mr. Kinzel has admitted that he's "not really a finance person." Given the company's recent histo
Slide 10: Questionable Decisions by Mr. Kinzel
Questionable Decisions by Mr. Kinzel. From the time Mr. Kinzel became Chairman on May, 21, 2003 to October 13, 2010, the company's unit price has declined by 48.7% while the S&P 500 Index has risen by 27.6%. Sale to Apollo at $11.50 per unit was opposed by unitholders. Mr. Kinzel would have received
Slide 11: Country Club Atmosphere on the Board
Country Club Atmosphere on the Board. The Cedar Fair board needs "new blood." Until two independent directors were added earlier this year, the average age of the board was 65 years and the average tenure of each member was 10 years. This leads to a lack of debate and vibrant discussion. Does this b
Slide 12: Separation of Powers and Good Corporate Governance Practices
Separation of Powers and Good Corporate Governance Practices. Recommended by the Yale School of Management's Millstein Center for Corporate Governance and the top governance advisors. 12
Slide 13: Proposal #2: Increased Priority on Dividend Distribution
Proposal #2: Increased Priority on Dividend Distribution. Q Investments believes that Dividend Distribution should be a higher priority than debt repayment. We are not setting the exact level or priority of distributions. Our proposal only says that distributions are a higher priority than debt repa
Slide 14: Unit price falls when the company reduces its distribution
The price of the units falls when the company reduces its distribution. We believe an increase in the distribution will be viewed favorably by the market. 14
Slide 15: Previously paying a $1.90 distribution per unit
The company was previously paying a $1.90 distribution per unit when earnings were at similar levels. 15
Slide 16: Distributions are especially important for Limited Partnerships
Distributions are especially important for Limited Partnerships: Distributions are important for Limited Partnership structures. Limited Partners of Cedar Fair receive a K-1 every year. Unitholders are required to pay taxes on Cedar Fair's income regardless of whether it actually distributes any cas
Slide 17: Is using Free Cash Flow to reduce debt being taken to extremes?
Is using Free Cash Flow to reduce debt being taken to extremes? We must ask whether Mr. Kinzel and the board have taken their apparent aversion to leverage to extremes by using nearly all of the company's Free Cash Flow to reduce debt? As shown in the table below, Cedar Fair produces strong and cons
Slide 18: Leverage Hypocrisy
Leverage Hypocrisy: By agreeing to work for Apollo in the LBO, Mr. Kinzel himself implicitly put a higher priority on distributions than debt reduction. Mr. Kinzel and the board currently have a strategy of reducing leverage to around 4.0x by 2013. They say it is prudent to pay down debt. However, M
Slide 19: Our Proposal does not box the company into a corner
Our Proposal does not "box the company into a corner" or remove all flexibility. Our Distribution Proposal does not say that the company must pay a distribution of $1.00 or more at all times regardless of external (economic, financial market, weather) conditions. Instead, it simply says that dividen
Slide 20: #3. Response to the Company's Proxy Statement
#3. Response to the Company's Proxy Statement Independent Chairman needed now, not later. Board's inability to create value over the past 7 years. No ability to talk to directors. Lack of financial successes over the past several years. Inability to nominate directors. 20
Slide 21: Independent Chairman needed now, not later
Independent Chairman needed now, not later. The company needs an Independent Chairman right now. Succession Planning could take longer than expected. Mr. Kinzel may decide that he wants to stay CEO if the company cannot find "just the right person." Having an Independent Chairman is especially impor
Slide 22: Board's inability to create value over the past years
Board's inability to create value over the past 7 years. The company wants to retain flexibility to invest its capital. What is Mr. Kinzel and the board's track record of creating value? 22
Slide 23: Paramount Parks acquisition and decline in unitholder value
The last major "investment" made by the company was the $1.2 billion Paramount Parks acquisition in 2006. Since announcing the transaction on May 22, 2006, the price of the company's units has declined from $27.39 to $13.62 on October 13, 2010. This represents a decline in total unitholder value of
Slide 24: No ability to talk to directors
No ability to talk to directors. The company claims that it regularly seek input from all unitholders, including Q Investments, and that it has an open line of communication. We find this statement puzzling as we are now prohibited from directly speaking with any of the directors. In June of this ye
Slide 25: Lack of financial successes over the past several years
Lack of financial successes over the past several years. Taking the Enterprise Value from $3.2 billion to $2.4 billion. July 2010 bond issue. Mr. Kinzel and the board authorized the issuance of bonds in the middle of market unrest and limited summertime liquidity at a yield of more than 9.125% even
Slide 26: Inability to nominate directors
Inability to nominate directors. In 2004, the company announced that it was changing its governance documents to align the governance procedures of the partnership with the "best practices" employed by other successful publicly held companies (2004 proxy statement). Now, the company is claiming in t
Slide 27: #4. Summary and Closing Remarks
#4. Summary and Closing Remarks Separation of Chairman and CEO is simply good corporate governance Having an Independent Chairman is especially important when picking a new CEO. Company has taken recent actions indicating, in our view, a lack of good corporate governance Claiming unitholders do not