Shares of theme park giant Six Flags Entertainment (SIX) were soaring today, up as much as 10.6% on the day before settling into a 5.5% gain as of 3:02 p.m. ET.

Around 2 p.m. ET, the Wall Street Journal reported that Six Flags was nearing a deal to merge with theme park rival Cedar Fair (FUN), which was up 7.8% around that time in its own right.

Often, the acquirer of a company falls on the news of an acquisition. However, it appears this deal, if it happens, maybe a merger of equals, and likely done through an equity swap. Therefore, the prospect of streamlining costs over a larger revenue base sent both stocks higher today.

A roller coaster giant in the making?

According to two people familiar with the matter, the merger deal is in its final stages, and could perhaps be announced in conjunction with Cedar Fair's earnings report tomorrow. Six Flags is due to report next week, also on Thursday.

You might be more familiar with the Six Flags brand, which owns 27 branded amusement parks, but Cedar Fair is actually the larger amusement park company by virtue of its also owning hotels near its amusement and water parks. Cedar Fair's market cap is $1.95 billion, and Six Flags' market cap is $1.74 billion.

Both companies were obviously hit hard by the pandemic, but this summer's heat waves also depressed a theme park recovery. So both of these companies have struggled, perhaps making a merger more necessary.

It will also be interesting to see who will control the company following the merger. Of note, Six Flags is run by an industry outsider, CEO Selim Bassoul, who came on in 2021 after 20 years as CEO of kitchen equipment company Middleby. On the other hand, Cedar Fair is run by a long-term Cedar Fair executive, Richard Zimmerman, who began his career in 1998 as the general manager of Cedar Fair's Kings Dominion Park.

Given that Cedar Fair is larger, it will be interesting to see what the company will be named, as well as if the companies decide to go with an outsider or insider to lead the new theme park giant.

Is either stock a buy?

Like many entertainment stocks such as cruises and others, Six Flags and Cedar Fair saw a double-whammy hit to their businesses from the COVID pandemic, and then a rapid rise in interest rates. To that effect, both companies actually have a significant amount of debt on their books, making profitability not just a want but a necessity.

Interestingly, in their recent quarters, Six Flags has recently reported growth in attendance, but less spending per capita than last year, while Cedar Fair posted the opposite: slightly lower attendance, but more spending per capita. Both companies were mildly profitable.

Of course, the merger isn't a done deal yet; however, given the potential short timeline to an announcement by the WSJ, it seems likely to happen. It will be interesting to see how these two beaten-down consumer discretionary stocks perform going forward as one.