This week's theme-park chatter has treated industry enthusiasts to the possibility that Six Flags (NYSE:SIX) is looking to buy some or all of SeaWorld Entertainment (NYSE:SEAS). The story initially broke on the Themed Reality blog's Facebook page, only to be amplified through coaster-loving hub BehindTheThrills and other industry fan sites and social-media accounts.
An outright buyout doesn't seem likely for reasons I previously spelled out. SeaWorld is finally on the rise, making it a hard asset to acquire. Six Flags finds its stock reeling lately, making an all-stock deal a hard sell. It also doesn't have the financial flexibility to bankroll a cash purchase.
Each chain's season-pass pricing practices also make it a trickier hookup than you might expect. However, I also promised to come back over the weekend with a couple of the reasons why the proposed pairing makes sense. Let's dive right in.
1. In a word: Florida
Six Flags has more than two dozen amusement and water parks, but it doesn't have a presence in Florida. The Sunshine State -- or more specifically, central Florida -- is ground zero for the theme-park industry, and rumors of Six Flags finally cracking the market come and go every few years.
Florida matters. Five of the six most visited U.S. theme parks are in central Florida. All four of the country's most popular water parks are in Florida. A whopping 5 of SeaWorld's 11 parks are in Florida, including its two busiest theme parks and two most visited water parks. Oh, and each of those four parks outdraw any single Six Flags attraction in that category.
Six Flags has avoided entering the cutthroat but lucrative Florida market because building a new park and establishing a local presence takes time and money. In one fell swoop, it would be a force in theme-park central overnight.
2. There's synergy and symmetry in scale
Six Flags attracted 30.8 million guests last year. SeaWorld squeezed 20.8 million visitors through its turnstiles. The two companies rank seventh and ninth globally in terms of chain attendance, but combined, the new entity would overtake Universal Studios to claim third place.
This isn't just about the bronze medal. There are benefits in the scaling process, and that's just what would happen here if Six Flags went from a company with trailing annual revenue of $1.45 billion to nearly double, to $2.8 billion, with SeaWorld in its clutch. Six Flags may operate more than twice as many parks but they aren't the heavy revenue generators one finds in SeaWorld's arsenal.
Life gets easier when you can allocate national marketing campaigns across more individual properties. The same can be said for group purchasing of everything from rides to supplier deals. One plus one truly would equal more than two here.
3. Letting the best-of-breed win out
Can Six Flags' D.C. Comics license carry over into SeaWorld's parks to woo teens and young adults? I'm no legal eagle, but I don't think it would be much of a hurdle if the acquired parks are rebranded.
Can SeaWorld's Sesame Street deal port over to help Six Flags do a better job of smoking out young families? There's a lot of third-party intellectual property that can be leveraged, and with three dozen parks between Six Flags and SeaWorld, the companies gain that much more of an advantage in proposing brand or franchise awareness.
Six Flags and SeaWorld melding together would allow executives to play Victor Frankenstein, taking the best of each chain to create a super park. Can you imagine a park with the scream machines of Six Flags, the live entertainment of SeaWorld, the aggressive season-pass marketing of Six Flags, the landscaping and family appeal of SeaWorld, and the culinary creations of -- well -- anybody else?
It's easy and fun to dream out loud, and every so often we hear whispers of a suitor for SeaWorld. It isn't likely to happen now that SeaWorld can stand on its own, but anything is possible if it makes enough sense.