The $2.4b sale of theme park operator Cedar Fair Entertainment Co to private equity firm Apollo Management LP has been called off.

Cedar Fair amusement park

Last year in December, Sandusky, Ohio based Cedar Fair (NYSE: FUN) had agreed to be acquired by Apollo for $650 million and the assumption of $1.6 billion in debt, in a deal valued at $2.4 billion.

The company would be taken private, and Cedar Fair unitholders would have received $11.50 in cash for each Cedar Fair limited partnership unit, with the deal contingent upon approval by shareholders.

But Cedar Fair pulled out of the deal just ahead of an April 8 meeting to vote on the matter. This meeting has now been cancelled.

Apparently investors including Q Funding III LP opposed the deal on grounds that the $11.50 per share price undervalued the company.

This led to the impression that they had been made a better offer, and Cedar Fair LP (NYSE: FUN) actually started climbing on the markets, ending the day on $12.37, well above the $11.50 deal price.

Given the huge deals going down (see Blackstone’s $2.7b AB-InBev Deal), its entirely possible they may get a better offer. But proof of that will come later in the summer, when the theme park crowds start surging in. Or not.

As of now, Cedar Fair has no other takers. In between December and now, Cedar Fair contacted 32 different parties to see if they could get a better offer, but nobody expressed any interest. And they have now let go of the one offer they had in their hand.

This leaves them with the distasteful task of having to refinance the massive debt, with around $700 million in maturities by 2012. This is going to happen only if the theme park sector in general, and Cedar Fair in particular, manages to dramatically improve performance over 2009.

Failing that, Cedar Fair will have two options – start selling individual parks in an effort to keep lenders at bay, or go down the Six Flags route. In fact, Q Funding has been approached by Six Flags for a possible merger between Six Flags and Cedar Fair.

Irrespective of which option Cedar Fair ends up with, it’s still a big gamble to give up a deal to cash in when your neck is on the line, based on the thin hope that the economy improves.

Photo by Chris Light