Swapping Thrills

Nothing signifies the recent failings of Six Flags (NYSE:PKS) quite as well as its Worlds of Adventure amusement park, just beyond the outskirts of Cleveland, Ohio. The operator's intentions were admirable at first. After acquiring the Sea World Ohio marine park and the adjacent Geauga Lake thrill park, the plan was to join the two properties, creating a single, massive gated attraction.

Spanning nearly 700 acres, Worlds of Adventure should have been the chain's jeweled centerpiece. Cedar Fair (NYSE:FUN) operated the popular Cedar Point amusement park just an hour's drive away, drawing more than 3 million guests a season. With Six Flags offering a decent value by combining both parks along with a water park for a single day's admission, it should have been a worthy competitor.

It wasn't even close. Drawing less than half of the 3.3 million turnstile clicks of its rival's park last year, the colossal failure exposed the inferiority of Six Flags for all to see. The operator had usually focused on regional strongholds in which it was pretty much the only game in town. It never followed Disney (NYSE:DIS), Anheuser-Busch (NYSE:BUD), and Vivendi's (NYSE:V) Universal into Central Florida. Its Magic Mountain park fared well in the Southern California hotbed of attractions, but mostly on account of Six Flags earmarking its most daring coasters for that location.

The ultimate slap in the face came this past summer when the company blamed the weather for the park's slump, just as Cedar Point was wrapping up yet another record season.

So it should come as no surprise to find that Six Flags will now be selling Worlds of Adventure to Cedar Fair. The $145 million transaction will help Six Flags in many ways. The cash will be welcome as a means to pay down its burdensome debt. Not to mention, the sale will also rid Six Flags of a pesky reputation killer.

Assuming that Cedar Fair is able to ramp the park -- to be renamed Geauga Lake -- up to its typical cash cow standards, the acquirer will make out even nicer. Readers of our Income Investor newsletter may appreciate Cedar Fair's juicy tax-advantaged yield, but it's also a slick operator.

While Worlds of Adventure averaged an annual operating profit of $16 million on $64 million in revenue under the Six Flags experiment, Cedar Fair's operating profit margin of 34.5% last year translates into a heartier $22 million slice of operating profits under the new regime. Having two resort parks that can be cross-marketed should also be a huge driver of annual pass sales. In other words, the annual returns on Cedar Fair's investment could improve significantly in the coming years.

So it's a win-win situation for both companies. Now it's time to ride it. The deal is expected to close before each park kicks off its 2004 operating season in two months.

Longtime Fool contributor Rick Munarriz loves his amusement parks. He owns shares of Disney as well as units in Cedar Fair.