Jana Partners, an esteemed activist investment firm founded in 2001 by Barry Rosenstein, has recently acquired an ownership stake of approximately 9% in Six Flags Entertainment. Known for their deep research and well-conceived strategies, Jana Partners has made a name for itself in the realm of shareholder activism. Rosenstein's approach, dubbed "V cubed," focuses on three key principles: Value, Votes, and Variety of ways to win. Over the years, the firm has transitioned its strategy to emphasize Stock price, Strategic activism, and Star advisors, aligning with top industry executives to drive value creation.
On October 21, 2023, Jana Partners announced its collaboration with notable figures such as Travis Kelce, Glenn Murphy, and Dave Habiger to invest in Six Flags. This partnership aims to engage with the company’s board and management to explore opportunities that enhance shareholder value and improve the guest experience. Six Flags, a prominent player in the amusement-resort sector, operates approximately 27 amusement parks, 15 water parks, and nine resort properties across the United States, Canada, and Mexico.
In a significant move, Six Flags had announced a merger with Cedar Fair in November 2023, which faced backlash from various investors, including activist firm Land & Buildings. Despite the merger being completed in July 2024, it has not yielded the expected results. While the merger was intended to capitalize on the strengths of both companies, including Six Flags’ regional dominance and Cedar Fair’s operational excellence, challenges arose from severe weather conditions affecting attendance and EBITDA during the peak season.
Following the merger, Six Flags saw its stock price plummet over 58% from the merger's completion to the day before Jana's announcement. This decline highlights the vulnerability of businesses to unique events like adverse weather conditions. However, Six Flags also faces persistent issues related to operational execution, the integration of Cedar Fair, and the search for a new CEO, as current CEO Richard Zimmerman plans to step down in 2025.
Jana Partners now marks its presence as the fifth activist investor in Six Flags, joining others such as Sachem Head, H Partners, Dendur, and Land & Buildings. While most of these activists have secured board representation, Jana is entering the arena with an impressive team that includes industry veterans and sports icons.
With a roughly 9% economic interest, Jana Partners plans to work closely with Six Flags' board and management to enhance shareholder value. Much of Jana's campaign aligns with concerns raised by other activists regarding the necessity to unlock value, potentially by rejuvenating the business as a standalone entity or monetizing its real estate assets. It’s essential for Six Flags to address its operational challenges immediately.
One key area identified by Jana is the integration of consumer-facing technology. Despite being over a year post-merger, Six Flags continues to operate more than 10 different apps, leading to inefficiencies in customer transactions. Streamlining this technology could significantly improve the guest experience and operational efficiency. Additionally, the company needs to reassess its operational strategies during inclement weather to avoid unnecessary losses.
Revamping advertising and marketing efforts is another crucial aspect of Jana's strategy. Six Flags, a well-recognized brand, has seen its advertising become stale, missing opportunities to leverage its national scale and regional marketing efforts. Notably, the involvement of celebrity Travis Kelce could provide a fresh perspective and draw attention to the brand. Although Kelce is currently a shareholder and not a formal brand ambassador, his popularity could be harnessed to enhance the company’s image and attract more visitors.
The ongoing search for a new CEO presents a prime opportunity for Six Flags to recruit a high-caliber operator capable of executing these strategic initiatives. The involvement of multiple activists in the process increases the likelihood of appointing a CEO focused on creating shareholder value. Additionally, the recent restructuring of the board and the potential for collaboration with Kelce may enhance the quality of candidates for the CEO role.
Moreover, this leadership transition may also open discussions about strategic alternatives, including the potential sale of underperforming parks or the entire company. Given the current market landscape, there could be significant interest from private equity firms and strategic investors in acquiring Six Flags, especially considering its existing licensing agreements with Warner Brothers.
Jana Partners brings a wealth of experience to the table, showcasing its ability to align with top-notch operators and strategists to address specific challenges faced by Six Flags. The combination of an influential brand ambassador and seasoned corporate leaders may provide the necessary momentum to rejuvenate the company and enhance shareholder value. As this situation unfolds, all eyes will be on the actions taken by Jana Partners and the Six Flags management team to navigate the path ahead.
