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6 lawsuits trying to stop sale of Kings Island parent company

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By Denise G. Callahan, Staff Writer Updated 10:22 AM Wednesday, December 30, 2009

SANDUSKY — Cedar Fair investors have filed several lawsuits seeking to stop the sale of Kings Island’s parent company.

Six different lawsuits have been filed by unit holders in Erie County Common Pleas Court against Cedar Fair’s board of directors.

Kings Island owner Cedar Fair announced on Dec. 16 it plans to merge with New York-based Apollo Global Management in a deal valued at approximately $2.4 billion. The Cedar Fair board of directors unanimously agreed to be acquired by the asset manager for about $635 million in cash. The company also would assume the estimated $1.6 billion in debt Cedar Fair had on its books as of the third quarter this year, Cedar Fair spokeswoman Stacey Frole said.

If the sale is consummated the unit holders would receive $11.50 per unit, an amount one of the lawsuit calls “meager.” The suits allege Richard Kinzel, chairman of the Cedar Fair board and the rest of the board members, will reap huge rewards from the merger.

The suit claims Kinzel holds 85,911 “phantom” units that will not be vested until March 2011, but with the sale he will realize a windfall of $987,976. Cedar Fair Chief Financial Officer Peter Crage would realize a $312,857 profit at closing on phantom shares he owns that won’t vest until 2012, the lawsuit claims.

“Defendants Crage and Kinzel decided to cash out under the proposed acquisition that benefited them, but was to the detriment of the unit-holders,” one lawsuit says.

Cedar Fair is allowed to consider other offers for 40 days, under the proposed merger agreement, but if it finds a more attractive suitor it will have to pay $11.4 million for breaking the deal, according to the lawsuit.

The merger was set to close by the second quarter of 2010. Apollo Global spokesman Jonathan Gasthalter would not comment when the merger was announced and could not be reached regarding the lawsuits.

Frole said Cedar Fair does not comment on pending litigation.

One of the attorneys on the class action suit filed by an Indiana investor, Jack Landskroner of Cleveland, said until these lawsuits are resolved, the sale can’t go through. The deal could have been scotched by a vote of two-thirds of the unit holders, but Landskroner said that wasn’t a sure thing because not all of the investors understand this is a bad deal for them.

The economy is starting to turn around and Landskroner said if the Cedar Fair waits a bit, the investors might get a better return.

“This is a strong company and even given the economy, it looks to be very promising,” he said. “Stock was trading really well as late as of August and September, in the mid-20s. With the anticipation of the economy picking up, this is a company is well positioned. They breached their fiduciary duties by turning a great deal for the directors but the shareholders aren’t getting what the full value could be sold for.”

Contact this reporter at (513) 696-4525 or dcallahan@coxohio.com.

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