Purchase adds to prospects & risk

Article Excerpt

CEDAR FAIR L.P. $26 (New York symbol FUN; Income Portfolio, Consumer sector; WSSF Rating: Average) has agreed to buy five Paramount amusement parks from CBS Corp. for $1.24 billion. This is a huge purchase for Cedar Fair, which earned $1.59 a unit (total $88.4 million) in 2005. Cedar Fair has just $4.5 million ($0.08 per unit) in cash, so it will have to borrow the money it needs. That will greatly increase its long-term debt of $504.6 million, which is already a high 1.3 times equity. The new parks do not overlap with Cedar Fair’s seven current parks, and should increase its annual revenues by 75%. The deal also gives it more parks that stay open year-round, as well as a park near Toronto, Canada, its first outside the United States. Savings from the merger should also give it more cash for distributions, but it will probably wait until it fully integrates the new parks before raising its current annual rate of…