It was just four months ago that Reuters was reporting that Six Flags Entertainment (SIX -0.55%) was making an offer to buy Cedar Fair (FUN -0.99%). The cash and stock deal, said to be valued at $4 billion, was reportedly eventually shot down by Cedar Fair.

A lot has changed on this coaster ride since the initial buyout chatter stalled on the brake run. Cedar Fair has meandered, with its units down 6% in an otherwise buoyant market.

But those investors are feeling blessed compared with what has happened at Six Flags. Its shares have plummeted 37% in that time as of Thursday's open, taking a huge hit this week following a disastrous financial update. Six Flags is obviously no longer in a position to woo Cedar Fair, especially since its own stock is now a rapidly depreciating asset in a transaction.

But this does open the door for Cedar Fair to consider turning the tables and making a buyout offer for Six Flags. It won't happen, but we may as well entertain the possibility at this point.

Superman roller coaster with riders going over a hill at Six Flags.

A Superman coaster at a Six Flags park. Image source: Six Flags Entertainment.

White-knuckled thrill rides  

Six Flags Entertainment is in a world of hurt. It posted brutal fourth-quarter results on Thursday morning. The headline news is that its CFO is stepping down next week and that it will slash its once-generous dividend by 70%. But beyond income investors and a key executive clearing out their lockers at Six Flags, the report itself was a disaster. 

Revenue and turnstile clicks declined during the seasonally sleepy fourth quarter, and Six Flags posted a loss for the period, surprising analysts who were targeting a small profit. Guidance for the year ahead is grim. Management sees $435 million to $465 million in adjusted EBITDA, contracting from the $527 million the company scored in 2019 (and well below the $554 million it delivered the year before that). 

The same quarter played out relatively better at Cedar Fair, as its revenue and attendance grew for the period. Cedar Fair also reversed a year-ago deficit with a healthy profit for the quarter. Only one of these two companies was "pleased" with its financial results, and it's just a matter of time before investors start to speculate if Cedar Fair should take advantage of the fire sale at Six Flags to swoop in with a buyout offer. 

The two companies are surprisingly similar in terms of trailing revenue ($1.47 billion for Cedar Fair; $1.49 billion for Six Flags) and adjusted EBITDA ($505 million for Cedar Fair; $527 million at Six Flags). The marginal lead that Six Flags commands on both ends should reverse itself in 2020. Both market caps are now perched just above $3 billion, but in terms of enterprise value, Six Flags is surprisingly higher at $6 billion to Cedar Fair's $5 billion price tag. If anything, one can argue that Six Flags is still not cheap enough for Cedar Fair to send out a lifeline. 

Cedar Fair prefers small nibbles. It acquired the last two Schlitterbahn water parks left standing last summer. It also closed on the purchase of an upscale resort near its flagship Cedar Point park in Ohio. Outside of the 2006 purchase of Paramount Parks, Cedar Fair prefers to order off the apps menu. But it probably wouldn't mind watching over the much larger geographical reach that Six Flags provides with its more diverse collection of thrill parks.  

Don't expect a deal to happen. Six Flags would have to fall a lot more before Cedar Fair seriously considers a purchase. There is a lot of work to do at Six Flags, and CEO Michael Spanos has only been at the helm a few months. If Six Flags is sputtering in this buoyant economy, it's frightening to think how it would fare in the next recession. One can expect Six Flags to become takeover fodder at some point, but it's hard to fathom Cedar Fair being willing to risk so much to hold up a bidder's card, despite the obvious synergies.