A surprise takeover of Cedar Fair LP announced four months ago died as abruptly yesterday, but that leaves the Sandusky amusement park firm figuring out how to restructure its $1.6 billion debt.

The failed $2.4 billion takeover by New York private-equity firm Apollo Global Management LLC means Cedar Fair will keep its public stock but has no plans to reinstate its dividend, a 25-cent-a-share quarterly payout that attracted individual stockholders before it was suspended at the end of last year.

"The balance sheet is something they have to address," said Scott Hamann, an analyst with KeyBanc Capital Markets. "It's the big elephant in the room."

As it announced the Apollo deal was dead, Cedar Fair said it initiated a "poison pill" plan, a mechanism to try to prevent a hostile takeover. The Sandusky company contended the plan was not related to any specific bidder, but Cedar Fair's largest share-holder holds nearly enough stock to trigger the poison pill measure and has had discussions about a possible merger of Cedar Fair and rival Six Flags Inc.

Cedar Fair and Apollo said they mutually agreed to terminate their deal in which the New York firm would have acquired Cedar Fair for $635 million in cash and assumption of debt. The deal would have eliminated the northwest Ohio company's publicly traded stock.

Two big Cedar Fair shareholders opposed the deal and together had nearly enough votes to reject it.

The deal, which would have paid $11.50 a share to stockholders, was to be voted upon by them tomorrow in Sandusky. That meeting was canceled, and the company set its annual shareholder meeting for June 7.

Cedar Fair, best known locally for Cedar Point, owns 11 amusement parks and six water parks in the United States and Canada. Among its holdings are Kings Island near Cincinnati and Knott's Berry Farm near Los Angeles.

The parks' operations won't be affected by the deal's termination, the company said. Cedar Point is to open May 15.

Dick Kinzel, chairman and chief executive officer of Cedar Fair, was not made available for questions yesterday. But he said in a statement: "The board has heard from Cedar Fair [shareholders], and it is apparent that the merger transaction does not have the required level of investor support.

"We are honored and excited by the opportunity to continue to manage and operate Cedar Fair as a public company and to provide our guests with an outstanding experience."

In a statement, Apollo said, "While disappointed in the outcome, we have profound respect for the company's management team and employees and we wish them well as they enter a new operating season."

Under the purchase arrangement, which was announced in mid-December, Cedar Fair must pay Apollo $6.5 million for its expenses. Papers ending the deal were signed by both parties Monday afternoon.

Cedar Fair officials had viewed the deal as the best bet to handle the debt. The firm has been hurt, as have its competitors, during the recent recession, with smaller attendance and lower spending by customers. Attendance at all of its parks was down 8 percent last year, and spending by customers was off 1 percent in the parks and 7 percent at the hotels it owns near its parks.

Shares of Cedar Fair rose 17 cents yesterday to close at $12.37 a share, in four times usual trading volume on the New York Stock Exchange. The stock traded at about $9 a share before the deal was announced in December.

One industry analyst attributed the stock price increase yesterday to speculation that Cedar Fair and bankrupt Six Flags might merge.

Q Funding III, one of a pair of Texas investment funds that together are Cedar Fair's largest shareholder at 18.1 percent, disclosed in a U.S. Securities and Exchange filing yesterday that it had conversations with the bondholders of amusement park chain Six Flags.

The bondholders approached Q Funding "concerning the hypothetical possibility of merging or combining [Cedar Fair] with Six Flags Inc.," the filing said. Q Funding said it had conversations with Cedar Fair about Six Flags' status and its bankruptcy, but had not discussed combining the two businesses because it believes "that any such conversations would be premature."

Cedar Fair said its new shareholder rights plan, to curb a hostile takeover, was not activated in response to Q Funding or anyone else.

The "poison pill," as such measures are called, would dilute Cedar Fair stock by giving existing shareholders the right to buy additional shares at a discounted price should any shareholder gain a total of 20 percent of all outstanding stock, the company said. That essentially would undercut someone trying to acquire large shares of stock to gain control of the firm.

Stacy Frole, Cedar Fair director of investor relations, said it was a preventive measure to give the company's board time to evaluate future options. The plan was authorized in 2004 but never activated until now and will remain in effect until 2013, she said.

Peter Crage, the chief financial officer, is to talk with the company's banks and lenders about "how we can improve our capital structure," she said. "We think the credit markets have improved. At this point in time we're focused on our capital structure and our 2010 operating season."

Jeff Thomison, an analyst with Hilliard Lyons Inc., said it's possible the "poison pill" plan and the Six Flags discussions are related.

"But I've never entertained the idea that there could be some kind of transaction between Six Flags and Cedar Fair. … Although they're both amusement park companies, those two companies are not similar in any other respect."

Six Flags, which owns a number of amusement parks nationally, is working with lenders to try to emerge from bankruptcy. Published reports have indicated that Apollo might be interested in acquiring Six Flags.

Mr. Hamann said speculation that the two chains might merge has been around a few years.

Q Funding did not respond to requests for comments. It said in a statement that it believes in the long-term value of Cedar Fair. "We are pleased the board decided to terminate the transaction with Apollo because we believe it did not offer the best long-term value proposition for shareholders."

Both Mr. Thomison and Mr. Hamann said it was no surprise that the takeover by Apollo fell through.

Besides Q Funding, the second-largest shareholder, Neuberger Berman LLC, an independent asset management firm that controlled 9.6 percent of the stock, also opposed the deal. Q Funding actively urged other shareholders to vote against the deal.

Opposition also included the Knott family, which founded Knott's Berry Farm amusement park in southern California and later sold it to Cedar Fair. The Knott family held a 3.4 percent stake.

The deal could be scuttled by 34 percent of shareholders, and three big shareholders who opposed it owned more than 30 percent.

Analysts said the deal perhaps could have been saved if Apollo had come back with a higher per-share purchase offer.

But Mr. Hamman, of KeyBanc, said that he "got the feeling that financing was very tough. I think there was some concern that Apollo wasn't going to be able to carry it off."

Cedar Fair now must figure out its next move, Mr. Hamann said. "I do think these guys do a good job of running the business," he said. "I'm just concerned about their balance sheet."

Contact Jon Chavez at:

jchavez@theblade.com

or 419-724-6128.

First Published April 7, 2010, 9:41 a.m.