Confused over who takes possession of Blackstone’s old SeaWorld stock when Zhonghong defaults on a loan? We’ve created an easy to understand chart for you.
Confused over who takes possession of Blackstone’s old SeaWorld stock when Zhonghong defaults on a loan? We’ve created an easy to understand chart for you.
Back in December last year I wrote about the Disney acquisition of FOX:
One of the biggest unknowns surrounds the Fox World theme park currently being built at Resorts World Genting in Malaysia. Construction is well underway, but would Disney allow a Fox-only theme park operated by a company that operates a Universal Studios-licensed park in nearby Singapore to exist? I expect that over the next six months, we’ll find out the fate of the Malaysia park – if it will continue as is under its current contract, or if Disney will sink its participation in the project faster than the Titanic attraction going into it, causing Genting to seek out another (or multiple other) studio(s) to partner with.
Well, it took a little longer than that as today Genting filed a lawsuit against Fox and Disney for many alleged acts of evil deedery. Click here to read the initial filing. I’ll share more about the case as the courts make more available.
It appears that Wang Yonghong remains in self-imposed exile in Hong Kong. He’s the owner of Zhonghong Zhuoye Group, the majority shareholder of Zhonghong Holdings, in case you didn’t know. I’d say he’s also the majority shareholder of SeaWorld Entertainment, but things are afoot behind the scenes that I’m not yet ready to discuss. Statewide, while Yoshi Maruyama retains the position of Chairman of the Board at SeaWorld Entertainment, it appears that he is no longer doing so as President of Zhonghong Americas LLC.
As for Zhonghong Holdings, the stock delisting process started on Friday, November 16 and will be completed on the final trading day of the year, December 28. A government mandated meeting with creditors that had been scheduled for November 16 has been postponed indefinitely due to Zhonghong just not having the documentation and analysis ready to deal with the hundreds of parties that filed against the company as creditors.
Two executives within a company involved in the proceedings told me that Six Flags was in talks to purchase all or or part of SeaWorld Entertainment. I was given permission by these individuals to post this information on grounds of anonymity. I was given additional information confidentially by these sources, but I adhere very closely to my six rules, so don’t expect those juicy tidbits to be shared until they’re public record.
The first thing I did after speaking with these executives was to attempt to contact the corporate PR directors at both chains for comment. I didn’t receive a response from either and made the decision to post the statement on the Facebook page and monitor feedback.
Now, if you look at the disclaimers that appear on both this blog and its accompanying Facebook page (in the Our Story window), you’ll see that:
. . . READERS ARE ADVISED TO CONSIDER STATEMENTS MADE BY ANONYMOUS SOURCES AS SPECULATIVE
Within an hour after posting, a follower of ThemedReality who happens to be a self-proclaimed expert on orca captivity, and who operates a website with the domain www.fromthedolphinspointofview.com, decided to tip off a reporter with the Orlando Sentinel. Although the reporter appears to have looked at the Facebook page, she never contacted me (though I must credit her for attempting to contact the theme park operators). Neither did individuals reporting on my post for the Orlando Business Journal and Orlando Weekly. In journalism, contacting a source before running a story is called due diligence and it’s part of the vetting process.
Yet, although this practice may not be the norm in Orlando, once the Sentinel article had hit the newswires and become international news, I was contacted by a number of major publications from the US, Canada, and the UK (it’s not that hard to contact me, even if it’s through a Facebook or twitter instant message). I explained to these reporters how this was a non-news story, that it should be considered nothing more than rumor, and a statement too broad and ambiguous to accurately interpret. They all agreed and it did not run in those publications.
One of the more interesting comments I found on a discussion thread accused me of panicking when I wrote two additional Facebook posts – one breaking down and analyzing the statement and the other disclosing that I do not own stock in either company – a preemptive move as the non-news mainstream media spread rumor had now bumped up share value at both companies. While this individual may call it panic, I call it being responsible. But I’m thankful for the hyperlinks in his comment to my posts. I learned a long time ago that the more people you piss off or get to ridicule you, the more likely it is that someone opposed to your stance will link to your post. And more links = more hits. It doesn’t really help me out financially. I’m not making $58,200** doing this. I’m not running ads on the blog (if you see ads, the money goes to WordPress), and I’m not in it for the notoriety. After all, this blog and its Facebook page are nothing more than my personal opinion and observations (it’s in the disclaimer), which is why, for the life of me, I have no idea why this small little blog nobody’s ever heard of recorded 72,000 hits in the first ten months of the year. Someone must be reading.
So now, this thing’s gone national. There’s analysis on message boards, videos are being made, and even the Motley Fool’s weighing in. What I found most interesting in following this is how many people took the statement verbatim. Everything I read was off the mark – with the exception of analysis by the website Behind the Thrills, where I’m an occasional contributor. The site’s owners were kind enough to not only contact me, but to enter into lengthy discussions about what I could share with them. But as strange as this might sound, the bloggers that took their information from or plagiarized Behind the Thrills still got their facts very wrong.
So how can this be?
Without breaking confidentiality, I can share one of the techniques I use when researching a personal blog post or a professional article that I’m writing for the day job. Often, it’s a matter of reading between the lines, looking at how words are grouped, and finding the message that isn’t on the surface.
In the Facebook post, I wrote:
Reliable sources inform me that Six Flags Entertainment Corporation is in talks to purchase all or part of SeaWorld Entertainment. More as details become available.
I never mentioned who Six Flags was in talks with.
Now, in all fairness, if Six Flags, SeaWorld, or another company involved contacts me and states on the record that talks never took place, I will gladly post a correction. But three weeks after the initial posting, that has yet to happen.
Osaka has been named the host city of the 2025 World Expo. Congratulations!
The blog Disney and more writes that this is huge news for Universal Studios Japan, located in Osaka, and very bad news for Tokyo Disneyland. I couldn’t disagree more, and here’s why.
The error lies in a gross misunderstanding of the business of world’s fairs and their impacts on local tourism economies. Whereas Olympic Games welcome the majority of their visitors from foreign territories, World Expos invite local populations to see the best that other countries have to offer.
For the 2025 Expo, organizers anticipate just over 28 million visitors – 3.5 million from foreign territories and 24.7 million from Japan. Japanese are very loyal to the Tokyo Disney Resort and it’s highly unlikely that a visit to Osaka would result in not visiting Disney, rather that Disney would be scheduled for a different trip. Many of these local visitors will be visiting the Expo on a day trip basis (Osaka is only 3 1/2 hours from Tokyo via bullet train), and therefore will probably hit Expo but leave Universal for another holiday.
As for foreign visitors, based on travel patterns from past world expos (and most of the foreign visitors to Osaka are anticipated to be from the Asia-Pacific region), they are expected to make multi-day, multi-city trips involving the Expo along other cities and attractions across the country, including Disney.
Another important factor is the kind of visitor to World Expos, which tend to be multi-generational families, and both Disney and Universal have figured out how to cater to that demographic. So, based on visitor composition, it could go either way based on preference – and the same problem exists in Japan as in the Southern California and Orlando market for families with limited time – Mickey Mouse and Wreck-it Ralph or Harry Potter and Nintendo?
**$58,200 is how much the US government paid an orca expert for a few months of research that was ultimately canceled. I’ll explain how and why in a future post.
BREAKING (10/19/2018): Today, trading of Zhonghong Holdings has been suspended by the Shenzhen Stock Exchange. The Exchange has begun the process of delisting the stock, which it must finalize within 15 days. Once completed, Zhonghong Holdings will become the first company to be delisted on a Chinese exchange. As of close yesterday, its stock was valued at CN¥0.74 or US$0.10 per share.
Zhonghong Holdings holds the exclusive license to SeaWorld branded parks in Mainland China, Hong Kong, Macau, and Taiwan. Its largest shareholder is Zhonghong Zhouye Group, the privately held investment firm owned by Wang Jihong, which purchased Blackstone’s 21% stake in SeaWorld Entertainment.
On Tuesday, Wang tendered his resignation as Chairman and Director of Zhonghong Holdings, as did Zhang Jiwei, the company’s President.
At this time, there has been no reportable direct impact on SeaWorld Entertainment’s ownership or board composition as a result of these changes. Updates will be posted on the ThemedReality Blog and ThemedReality Facebook page (Facebook.com/themedreality) as this story progresses.
There are a lot of things I want to cover today that aren’t related to marine life parks, but I want to get these three stories out of the way while they’re still relevant. I’ll have a separate post towards the end of the month covering Warner Bros World Abu Dhabi, Two Bit Circus, California Trail at the Oakland Zoo, and new coaster experiences at Europa-Park and Liseberg. Today’s post will be split into three different ones posting throughout the day. And now, some breaking news.
For the first half of 2018, SeaWorld reported increased attendance and revenue (although there was actually a loss in revenue for the first quarter due to severance payments for a number of executives). The company has gone back to its roots and is operating its destination parks in Florida and California as if they were regional parks, pushing annual passes in the local market and building up events year round to pull those pass-holders back in, which increases both attendance and per cap spending in the parks.
The policy of adding a new attraction or show every year in each park is one that has proven successful for both Six Flags and Cedar Fair, again promoting return visits, which lead to increased annual pass sales. The increased regional attendance has filled the void created by a loss of tourism from foreign territories in the prior few years.
In the company’s filing with the SEC were a few juicy morsels. Here are a few of them:
On February 27, the day after he resigned, Joel Manby received a lump cash payment of $6.7 million. Yeah, that’s a lot of money for a company trying to cut costs. But I’m not surprised. The annual report’s exhibits include an amendment to the contract for Denise Godreau, who left the company after just over a year of employment as the Chief Marketing Officer. The amendment offered her up to $2 million to purchase a house.
These next two come straight from the 10Q. We’ll be addressing this later today, when I look at Thomas Cook, PETA, and the ethics of animal rights and welfare:
“Negative publicity can also impact our relationships with our business partners and ticket resellers. For example, in July we were informed that one of our ticket resellers in the United Kingdom will discontinue selling SeaWorld-branded tickets beginning in July 2019. Although we do not expect this decision to have a significant impact on our business nor do we currently consider this to be a material trend, we continue to monitor any such items that could impact attendance trends. As a reminder, historically, aggregate attendance from the United Kingdom represents approximately 5% of our total annual attendance.”
But first, I’m going to address this:
“We are exposed to the risk of loss in the event of non-performance by such strategic partners or other counterparties. Some of these counterparties may be highly leveraged and subject to their own operating, market and regulatory risks, and some are experiencing, or may experience in the future, severe financial problems that have had or may have a significant impact on their creditworthiness. For example, in April 2018, it was reported that an affiliate of ZHG Group was experiencing financial distress. The inability of affiliates of ZHG Group to pay amounts due to us or otherwise fulfill their obligations to us under their agreements with us, including the ECDA and/or the CDSA, could have an adverse impact on us. In addition, the sale or transfer of our common stock owned by affiliates of ZHG Group, or the perception that such sales or transfers could occur, could harm the prevailing market price of shares of our common stock.”
So there are two companies named Zhonghong. One is Zhonghong Zhuoye Group (ZZG), a private investment firm. The other is Zhonghong Holdings Group (ZHG), a publicly traded real estate development and tourism company. Both are in China. ZHG has the license to develop SeaWorld parks in China. ZZG owns Blackstone’s former 21% stake of SeaWorld Entertainment.
Zhonghong Zhuoye holds a substantial amount of stock in ZHG and the financial woes of the latter greatly impact the stability of the former. On April 17, I reported the following on the ThemedReality/Final Days of Conventional Wisdom Facebook page.
Some news on Zhonghong Holdings, the company developing SeaWorld-branded parks in China. Zhonghong Holdings predicts an expected loss for its first quarter (Jan 1 – Mar 31, 2018) of 300 million yuan (US$47,731,500). This is in comparison to the same period last year, which saw a profit of 8.95 million yuan (US$1,424,437.25 based on today’s exchange rate). For those of you not adept at math, the ThemedReality Computronic Gizmo computes that to be a staggering decrease of 3451.96% for first quarter profits from 2017 to 2018.
Here’s more fun with numbers. Zhonghong Holdings also released an amended estimate for fiscal year 2017 (Jan 1 – Dec 31) of a loss of 248 million yuan (US$39,463,000), down from a 2016 profit of 157 million yuan (US$24,990,475). The ThemedReality Computronic Gizmo computes that to be a drop of 1679.13%.
So questions have arisen among some of the card-carrying members of the ThemedReality Universal Team of Helpers (TRUTH) as to whether or not Zhonghong Holdings will be able to pay off its loans, due within two years, for its 90.5% stake in British tour operator Abercrombie and Kent. The loans consist of a US$77.5 million loan from Zhonghong Zhouye group, a major Zhonghong Group shareholder (whose shares in the company keep getting frozen by Chinese courts) and the owner of a 21% stake in the US theme park company SeaWorld Entertainment, and another US$335 million in interest bearing loans from non-Chinese banks. The company’s lack of profit precludes it from using earned revenue to pay of the principal on the loans.
On the same day, April 17, I also reported:
According to the ThemedReality Computronical Gizmo, Hill Path Capital now owns just over 28% of SeaWorld Entertainment, which, according to the ThemedReality Computronical Gizmo, is also more than the 21% stake that Zhonghong Zhouye Group purchased from Blackstone. Hill Path Capital is the investment firm of SeaWorld board member Scott Ross (the investment banker, not the famed harpsicordist). At Apollo Global Management, Ross played key roles in the acquisition of both Chuck E Cheese and Great Wolf Resorts, both of which were turned profitable and then sold off by Apollo (a corporate version of house flipping). Then again, the ThemedReality Computronical Gizmo is an abacus held together by duct tape….so there’s that…
Although the proxy material sent out by SeaWorld to its shareholders eight days after my Facebook post stated that Hill Path owned 15.3% of common stock, a small footnote indicated that SeaWorld’s figure was based on a November 2017 filing. If my figures are correct, Hill Path is now the largest shareholder of SeaWorld Entertainment and the staff layoffs that took place the day after 2nd quarter earnings were announced is a strategy straight out of the Apollo playbook.
One thing that differentiated this staff cut from others is that it wasn’t simply a matter of eliminating one individual and consolidating their responsibilities into the duties of another just to save money. This one was very well thought out (the advantage of having a Chief Strategy Officer onboard, it seems). Quite a few middle managers were eliminated and the process of parlaying information and data between the top and bottom of the heirarchial personnel structure has been streamlined.
This is usually done in anticipation of a sale, as an efficient HR structure is more appetizing to potential suitors and minimizes issues with staff integration during an acquisition or merger.
A number of my contacts in Hong Kong and China have advised me to expect an announcement within the next week or two by Zhonghong of a sale to Hong Kong-based investment firm Pacific Alliance Group (PAG). However, I’m hearing different details as to what that sale entails.
In one scenario, PAG purchases Zhonghong Zhyoue’s shares in Zhonghong Holdings. This is a risky move based on three factors:
More likely, PAG could purchase ZHG assets, which include the luxury tour company Abercrombie & Kent, some nice real estate, and the exclusive SeaWorld license for China.
Most likely is this scenario, which is based on the highly probable belief that ZZG may have missed one or more escrow payments to Blackstone and defaulted on their contract for the stock sale. If this is the case, then the 21% stake of SeaWorld that ZZG owns is being transferred to PAG. And if Hill Path sells its shares to PAG, then PAG will end up owning almost half of SeaWorld.
And there’s one other little surprise. CLICK HERE
That’s right. If it’s scenario three, we’re back at the beginning.
For those of you new to the blog, welcome. For those of you returning, you’ll notice a few changes. Instead of doing a blog post on one or two topics, I’m switching over to a new format, which I’m calling “The Other Side of the News.” This format, which will run monthly (and on occasion, more frequently than that), will look at attractions industry news items you may not be aware of, or elements of news stories typically not covered in conventional media.
This blog is notorious for its sarcastic and sardonic approach, and that will remain, although it will be toned down a bit in order to concentrate on the news at hand. The Other Side of the News should not be considered a news article. It’s an opinion piece and is based on my analysis of the facts publicly available (unless stated or implied otherwise). There’s a disclaimer tab at the top of the page and I recommend taking a look before proceeding because…well…lawyers gotta be paid for something.
Some big news coming out of Disney’s D23 Expo was that Universe of Energy (AKA Ellen’s Energy Adventure) is being removed to make room for a Guardians of the Galaxy Ride. Almost immediately, Disney fans started protesting and griping all over the Al Gore Webosphere. So here are some of their arguments and why they’re wrong:
Walt would have never changed an attraction like this during his lifetime.
NOT ONE single Disneyland attraction that opened in the 1950’s, 1960’s, 1970’s, 1980’s, or 1990’s retains its original appearance – and a number of these changes happened during Walt’s lifetime. If it wasn’t the attraction’s narrative or scenic elements, it was via improvement in lighting, sound, show control, animatronics, or safety systems. Imagineers from the very beginning have had a long history of removing elements that haven’t worked and of looking for ways to improve attractions wherever they could.
They can’t get rid of the dinosaurs! Those are a part of EPCOT!
Tell that to Dreamfinder. Regardless of the fact that these are NOT the original 1964 World’s Fair dinosaurs, which reside on the Disneyland Railroad in Anaheim, Disney has a history of recycling its attractions. They could end up in Animal Kingdom, fleshing out the Dinosaur ride that’s already there. Perhaps they’ll be donated to a science museum. My money’s on them being reskinned as alien beasts and staying in the attraction.
A movie franchise like Guardians of the Galaxy has no place in EPCOT
In 1987, Disneyland’s Tomorrowland was the West Coast’s Epcot Future World of its day, with semi-fact based attractions such as Circle-Vision, America Sings, Mission to Mars, and the Submarine Voyage. Then a certain attraction called Star Tours opened, replacing the semi-educational Adventure through Inner Space. The moral: It’s happened before. And you loved it.
The stars of the latest incarnation of the Universe of Energy, Ellen’s Energy Adventure, are as relevant today, if not more, than they were at the time of the attraction’s opening in 1996. But today, they’re relevant for different reasons. Ellen is no longer a sitcom star. She’s become an iconic trailblazer for civil rights and the oppressed. Jamie Lee Curtis was still a few years off her sexy turn in James Cameron’s “True Lies.” She now encourages women to embrace their bodies and their natural beauty. Bill Nye has moved on from children’s science shows to become CEO of The Planetary Society. And Alex Trebek died a few ago and was replaced by a semi-autonomous android designed by IBM’s Watson supercomputer. All four have expressed concern with climate change and with the continued use of fossil fuels, so it makes no sense to continue having them in an attraction that actually espouses the merits of coal mining, fracking, and oil drilling.
Look, change happens all the time at theme parks. It’s part of the evolutionary process and necessary for enticing new guests to visit while encouraging existing guests and passholders to return. If you can’t retain guests, you can’t stay in business. Thinkwell’s Cynthia Sharpe and Dave Cobb have written a fantastic blog piece on the importance of theme park change as a reflection of changing social mores. And remember, each Cobb Salad you buy at Denny’s gives Dave Cobb double frequent flyer points! (see disclaimer, top of page)
2006 was a huge year for Whoopie Goldberg. Having been banished years before from Superstar Limo, Califia herself became the new on-screen host of the the Universal Studios Tour. So for a brief few years, Whoopie could be seen on screen at two competing Southern California parks. But of course you know that, so it’s not surprising that Whoopie just did something highly commendable across the street from her old “Golden Dreams” theater.
While being interviewed during the Disney Legend (also known as the One Arm Bandit) induction at D23, Whoopie brought up the Disney films “Dumbo” and “Song of the South,” stating that it’s time they be embraced and discussed for what they are. I have to agree.
There’s been a double standard at Disney where “Song of the South” has never been released on DVD and “The Martins and the Coys” segment of “Make Mine Music” was removed for being stereotypically offensive, while at the same time the limited edition DVD series “Walt Disney Treasures” contained cartoons offensive to modern standards (such as Pluto appearing in blackface as Aunt Jemima). But I guess that’s ok, as long as your limited run of DVD’s is only being bought by fans and cinephiles and includes an explanatory video introduction about how times were different back then by Leonard Maltin.
I want to go one step further than Ms. Goldberg (who I do hold in high regard).
James Baskett’s status as a Disney Legend (2010) is overshadowed by the continued withholding of his most famous work.
He needs to be recognized for it. Yes, doing so will necessitate Disney releasing “Song of the South” on video, a film for which he was awarded an honorary Oscar in 1948, and it will necessitate discussion in a public forum. It’s important, in this time and age when we as a society explore race, race relations, and racial heritage, that children understand the song “Zip-a-dee-doo-dah” did not come from a bunch of animatronic animals on a teetering showboat viewed from flume logs. It was Mr. Baskett who introduced the song into American culture – it was on the shoulder of Uncle Remus, the character he played in the film, that Mr. Bluebird landed. Seems to me it’s a lot easier to deal with a bluebird on your shoulder than to continue dealing with a monkey on your back (and I’m going to be preemptive because I know there are some who will see what I just wrote and be astounded that I allowed such a racial epithet to go through, when in fact it’s not. The phrase “monkey on your back” derives from the Fifth Voyage of Sinbad in the 12th century version of the Arabic classic “One Thousand and One Nights,” wherein “The Old Man of the Sea” attaches himself to Sinbad’s shoulders and will not let go. Eventually, Sinbad is able to get the Old Man to loosen his grip and he promptly smashes his head. The 1893 English language children’s version of the book, “Fairy Tales from the Arabian Nights,” edited by E. Dixon – which actually mentioned the head smashing – featured an illustration by J.D. Batten of the Old Man as a grotesque ape like creature. Whether Mr. Batten’s conception was rooted in the racism of the era is not known – I could not find any indication of racist leanings. However, this is why it’s important to maintain open discussion on art – and film – and to make the original material available to review in context.)
I recall the one trip I made to the Johnson IMAX Theater at the Smithsonian’s National Museum of Natural History in Washington DC. I was there for an industry preview of the IMAX film “Coral Reef Adventure” and I remember three things vividly: First, it was 2002 and the theater, only three years old at the time, was absolutely beautiful, and even had a retractable stage. Second, they took away our wine as we left the atrium and entered the theater. They would not allow us to carry it inside. Third, Jean-Michel Cousteau sauntered up to the podium with a glass of wine in hand. I remember being very upset and wishing that one day they’d tear down the IMAX and expand the cafeteria.
Well, unfortunately, my wish has come true as the Smithsonian plans to do just that, claiming that the theater is often only at 20% capacity. I know the people who manage it and the people who market it, so I can’t really conceive why this is happening. But I do have a couple of general ideas of developments that may have contributed:
The group Save Our IMAX is fighting to stop the closure. I completely applaud them and encourage you to join their cause. However, the campaign is far from perfect and I would like to offer the following suggestions in this open format:
SeaWorld canceled its Blue World Project, a series of huge killer whale tanks, and instead did this thing called Orca Encounter in San Diego, which is a show, but it’s not really a show. It’s a documentary film accompanied by live whales, and it’s not working. Neither is Ocean Explorer, the park’s attempt to compete against LEGOLAND California and its SEA LIFE aquarium. I know this because during the recent Q2 earnings call, SeaWorld CEO Joel Manby said the company does not expect to see a return on investments on the California attractions.
Here’s some other exciting things I picked up on during that earnings call:
I noticed two things really missing from the press release and earnings call, although one was very explicitly addressed in the SEC filing. There was barely any mention of Zhonghong, the Chinese company that had just purchased Blackstone’s 21% stake in the company. Manby basically told analysts if they had questions about Zhonghong, they should contact Zhonghong, adding that the two Zhonghong directors on SeaWorld’s board were well engaged and a pleasure to work with. Something felt off. Something was missing.
Then I was told by a source who would be in a position to know, speaking on grounds of anonymity (see disclosure tab at top of page) that Zhonghong had at the last minute decided against tendering for the time being an offer to buy SeaWorld, which required SeaWorld to make sure no documentation had any indication of any buyout, and all at the last minute. Which is why the press release for the second quarter financials came out almost two hours after its usual wire service distribution time, and why the SEC filing was not done until end of day the following day, almost thirty-six hours later.
Just prior, Zhonghong had placed a $3 billion acquisition of Brookdale Senior Living on hold after Chinese banks (if you’re a Chinese company, you must secure financing through Chinese banks) downgraded the company’s credit rating to “unfavorable,” resulting in Zhonghong being unable to secure financing to complete the Brookdale acquisition. Scouring the ChinaWeb, I’ve come across a document which is either a complaint or a legal filing (not sure yet which), alleging fraud on Zhonghong’s part with a 2016 residential development near Beijing. The claims are eerily similar to a 2016 SEC fraud investigation regarding Comcast’s purchase of DreamWorks Animation (DWA). Although Zhonghong is not mentioned as being investigated or as a defendant in the SEC case, it is mentioned by name as a co-suitor to purchase DWA with one of the defendants. Although I can’t be certain any fraud investigation has affected Zhonghong’s purchase of American companies, Zhonghong certainly has been effected by the same Chinese government investigation on lending for foreign investment that saw Dalian-Wanda group drastically reinvent itself. My source also tells me that both Manby and Board Chair David D’Alessandro will stay on through at least the end of the year, by which time the acquisition is expected to be back on and nearing completion.
At the same time, private investment firm Hill Path Capital continues to buy shares of SeaWorld, to the point that it is in the top four in terms of company ownership. According to a Merlin Entertainments call the day before SeaWorld’s call, Hill Path is pushing SeaWorld’s management to sell off the two Busch Gardens parks in order to obtain immediate revenue. SeaWorld was very explicit in its Q2 SEC filing that it wants Hill Path to have no part whatsoever in any board or management decisions.
These past forty-five days have been difficult for SeaWorld, with the stillbirth of a beluga calf, the death of what was advertised as “the last SeaWorld orca born in captivity,” and the euthanasia of one of the company’s most revered orcas. I’m not going to discuss welfare or health issues here. If that’s your cup of tea, there are plenty of other sites on the interweb covering both sides of the argument. One in particular caught my attention.
Michael Mountain writes on the Whale Sanctuary Project website about the death of the killer whale Kasatka. He schools SeaWorld for their interpretation of the term “family,” disputes the company’s healthcare and medical diagnoses, questions if her trainers loved her, and then implores SeaWorld to release their whales into a sanctuary, perhaps the very one his group plans on building.
I felt like I was reading a SeaWorld of Hate piece – you know, PETA’s anti-SeaWorld page, since this followed the traditional PETA anti-Seaworld layout – call out SeaWorld on everything they do, then implore them to move their whales to a sanctuary.
I don’t think it was a wise move for the Whale Sanctuary Project, and here’s why.
You need whales for your whale sanctuary and there’s only two ways you’re going to get them – through the courts or building bridges with the whales’ owners. You can have Kiska in Canada, but right now the law prohibits her being moved out of Ontario. You could have had Lolita in Miami, but certain lawsuits and Endangered Species Act recognition means lots more red tape and hurdles to jump through. I’m pretty sure you want Morgan from Loro Parque, but first you’ve got to figure out just who owns her (I’ve seen Loro Parque say she’s a ward of the Dutch government, their whale, and SeaWorld’s whale. Guess it depends on the day). That leaves the SeaWorld whales. And with posts like this, you’re burning necessary bridges far faster than you can get the materials to build new ones.
Marineland of Canada released quite a few press releases last week. One was about the death of the beluga calf Gia. Along with it was a link to a video on Marineland’s animal husbandry. I recognized the licensed music in the video. It was the same selection that Comcast’s customer service office uses. I found myself automatically headed to the bathroom thinking I was going to be on hold for 20 minutes.
But what Marineland’s doing is far more interesting than listening to a pre-recorded ad for Comcast’s Xfinity internet service play eighty times in a row while you’re internet’s down. Marineland has chosen it’s enemy as it’s become confrontational with the Ontario SPCA, going so far as to state in January: “The OSPCA is continuing a publicity campaign at the behest of a band of discredited activists with little relevant expertise or knowledge, in an effort to avoid further embarrassment related to an ongoing investigation into the OSPCA’s perceived failure to protect animals that is being led by the same activists they are now firmly in bed with.”
Yes, the OSPCA is a Society for the Prevention of Cruelty to Animals, much like many other SPCA’s or humane societies throughout the world. What makes it unique is that in addition to being a charitable organization, it is also the government mandated enforcement agency overseeing animal welfare issues in the province of Ontario.
Whereas something like a complaint being filed by, say PETA or the Animal Welfare Institute against a zoo or animal-based theme park would be a civil complaint, a complaint from the OSPCA is a criminal complaint. It is up to the Crown prosecutor to act on the charges and, in the most recent case, the charges were dropped.
Marineland continues to counter the OSPCA’s claims through press releases over the wire services, even callign the OSPCA’s Senior Manager of Communications a “self-proclaimed ‘PR (public relations) pro & writer by trade’ with no actual involvement in delivering Ontario SPCA’s animal welfare mandate.”
So, after treatment of this kind in the media by Marineland and other private zoo owners, it’s not a surprise that the OSPCA released an announcement that:
The Ontario SPCA believes that animals on exhibit in zoos solely for commercial gain is an antiquated business model that must be stopped. The time to begin working towards this goal is now, if we work together to ensure our expectations are clear for elected officials.
The Ontario SPCA advocates that the Government of Ontario put in place the following, on behalf of animals in zoos:
So…the gloves are off….on both sides.
Christian Dieckmann and Howard Newstate have left Cedar Fair (to 3D Live and Holovis, respectively). What does this mean for the chain? Well, we’re likely to see less of the high tech attractions (VR is still gonna be around) like Iron Reef, Wonder Mountain’s Guardian, Mass Effect, and Plants v Zombies.
So what’s taking their place?
I’ve spoken extensively with the management of California’s Great America and with Clayton Lawrence, who was recently promoted from his post at Great America to become Cedar Fair’s Corporate Manager of Live Show Development. The company’s taking a back to basics approach. It’s looking back at the history of its parks and the communities in which those parks exist and honoring both. Food service is being upgraded, accommodations are being improved. The company will present a whole slate of live entertainment with a unified standard across all parks. And most exciting of all, festivals and events are going to be a special emphasis, from craft beer festivals to beach parties, Haunt, and Winterfest, Cedar Fair will be creating multiple reasons to visit year round as they put the amusement back in the park (yep, there’s a disclaimer at top of page).
Six Flags Over Texas was named after the six flags that at various times flew over the state of Texas – Spain, France, Mexico, the Republic of Texas, the United States of America, and the Confederate States of America. In light of the recent events in Virginia and elsewhere, Six Flags opted to remove the Confederate flag from its flagpole. Then they did one better – they removed four more of the flags and replaced them all with American flags.
In Canada, after a mother posted a Facebook photo of a carousel horse at La Ronde, Six Flags’ theme park on the Expo 67 site in Montreal, the company agreed to remove the horse, which featured the severed head of a Native American. While America deals with its racial unrest, Canada is dealing with its own legacy of abuse of First Nations tribal members. The history is a long and hard one that spans from the forced relocation to and abuse at residential schools – an attempt to “educate” the native out the native culture – to today’s epidemic of young aboriginal women disappearing and being killed.
I applaud Six Flags and its individual park management for doing the right thing.
On Friday March 24, it was announced that Blackstone will sell its 21% ownership of SeaWorld Entertainment to China’s Zhonghong Group for $23.00 per share, a markup of more than 30% over market value on the day of the announcement. Zhonghong can purchase additional shares, buying up to 24.9%, and even own 30% or higher with board approval.
Zhonghong is a real estate investment firm based in Beijing and founded in 1995. In 2010, the company hired American themed entertainment design firm Thinkwell Group to develop a large-scale Monkey Kingdom theme park, based on the famed Journey to the West folklore story. Monkey Kingdom was scheduled to open in 2014 in Huairou, Beijing, but was put on hold due to a number of factors, among them a temporary ban enacted in late 2011 on the construction of new theme parks throughout China and a later re-zoning of Beijing that allows only one amusement park per district. According to Chinese media, Monkey Kingdom is back on track to open, but in a new location – Jinan, Shangdong, about five hours to the south from its original location. It is slated to open in 2020.
Zhonghong’s largest shareholder is Qilu Securities Shanghai Assets Management (QSSAM), which owns 20.5%. Other Zhonghong owners include a number of international hedge funds and institutional investors, many connected with or owned by the Chinese government. QSSAM is an affiliate company of Zhongtai (China and Thailand) Securities, which is controlled by Laiwu Iron & Steel Group, a government-owned steel manufacturing and distribution company. This should not be surprising, as every business in China, by law, is partially owned by a government-related entity.
Without discussing the complexities of international business law, the Chinese government will soon be a part-owner of SeaWorld Entertainment.
Now, this certainly isn’t the first time the Chinese have purchased an American entertainment company. Dalian-Wanda Group, which just backed out of a deal to purchase Dick Clark Productions, owns AMC Entertainment, North America’s largest cinema chain. Wanda, which is one of China’s leading leisure companies, has also committed billions of dollars to new theme park projects in India and France.
But what does this mean for SeaWorld? Well, one thing’s for certain – a lot of work is coming for the company’s Deep Blue Creative design studio and its partners, at least overseas. But other than that, it’s time to put on the speculation hat:
Chinese multinationals often invest heavily in foreign companies or provide infrastructure services (such as rail, dams, sewage) to other countries as an example of the country’s economic might. A Chinese-owned SeaWorld Entertainment could see huge economic investment in the US parks, allowing the theme park company to finally be on a competitive level with Disney and Universal. Duplication of attractions in the US and China could provide similar attractions for different audiences on different continents, reducing design and production costs. How much investment are we looking at here? In 2011, it was announced that Monkey Kingdom would cost around US$1.5 billion. That’s US$150 million more than SeaWorld’s entire revenue for its 11 parks and other corporate ventures during all of 2016. And I’m not adjusting for inflation.
SeaWorld could sell of its US properties and exit its San Diego lease, segueing into a company that develops and operates parks in Asia and the Middle East, where the political climate is friendlier to animal-based entertainment companies. Under this scenario, those animals not restricted to export by the Endangered Species Act, along with the company’s coasters, would be shipped overseas.
The Orlando park is still beset by reduced attendance from Brazil. Although a number of park critics have questioned this factor as just being an excuse to hide from the reality of fewer people wanting to attend the parks, state tourism figures issued by the State of Florida do show reduced visitation across the state from Latin America, along with lower hotel occupancy for 2016.
Over the weekend, I had a conversation with a number of San Diego hoteliers. One was willing to speak on the record, but requested anonymity. As I have not confirmed her statement through other channels, please consider it as opinion and with some skepticism:
There’s been a bit of confusion in the market since SeaWorld announced that One Ocean closed. Most of our guests think the park doesn’t have orcas any more. Some ask our staff if they were shipped to Orlando. It doesn’t help that SeaWorld until just recently stopped calling them killer whales. So now, when one of our guests comes up to the desk and asks if they still have killer whales, we tell them they still have the orcas, and they say ‘No, I didn’t ask about orcas. I asked about killer whales.’ What I do know for certain is that more and more of our guests are avoiding SeaWorld because they think the orcas are gone.
San Antonio appears to be the one SeaWorld-branded park where attendance is stabilizing. It, along with Orlando, are two properties the company owns outright, which either could be sold for a huge profit or developed. Don’t forget – Zhonghong also develops housing.
Two companies in China currently have orcas. There are nine at Chimelong Ocean Kingdom in Zhuhai and six at Haichang Ocean Park’s Linyi (Tiger Beach) Polar Ocean Park. Some of the Haichang orcas are scheduled to relocate to the Goddard Group-designed Shanghai Polar Ocean World when it is complete. Other companies have announced plans to exhibit orcas in new or existing parks. None of the fifteen orcas have been on public display.
Chinese companies obtained their orcas through Russia’s TINRO Center, a quasi-government fisheries institute headquartered in Vladivostok. Earlier this month, the head of TINRO was arrested and charged with the illegal capture and export of belugas and orcas to China. Although the arrest is tied in with a major initiative to increase offshore drilling in the Sea of Okhotsk, where the orcas are captured, it also creates a hardship for Chinese parks, as it dries up their only source.
Currently, the only state SeaWorld operates in with a prohibition on the export of orcas is California. The prohibition was signed into law on September 13, 2013 as part of the state budget. Violating the prohibition on breeding or export in California is a misdemeanor offense and carries a maximum fine of US$100,000, not a big fee for a company spending US$429 million on SeaWorld stock.
Representative Adam Schiff, who you can see nightly on the news dealing with one sort of catastrophe or another, introduced HR 1584 last week, which would amend the Marine Mammal Protection Act (MMPA) to prohibit on a national level the import or export of orcas for public display, along with breeding. Violations under the MMPA are treated much stronger than those under the California law and could lead to felony convictions and jail time. The Schiff bill presents a time constraint issue for exporting orcas.
So, under this third scenario, the parks remain in the US, along with heavy investment in the American parks, and only the orcas are removed.
Yet questions remain – what about SeaWorld’s commitment not to breed orcas at any of its parks, including international locations?
Company policy changes – often in only a few months. In December, SeaWorld was preparing to take the California Coastal Commission to court over a permit ruling that would have banned orca breeding at the park. Three months later, the company’s new CEO Joel Manby announced a voluntary end to the practice, one that to some may have appeared to be animal welfare driven, but by all accounts, was fiscally based.
Yet, the company’s stock value (under US$20 for quite some time), attendance, and profits continue to drop. If they continue to fail to increase, especially with new ownership on board, we likely could see yet another management change at SeaWorld. And often, with new management, policies change.
As Zhonghong acquires 1/5 of SeaWorld Entertainment, along with its two seats on the Board of Directors, we’ll get an indication of how much control the company wants to exert on its American acquisition. What will happen with the relationship Manby established with the Humane Society of the United States, an organization often critical of Chinese policies? What will happen to the American parks, including the two Busch Gardens parks? What future lies in store for the animals?
If SeaWorld’s animals are relocated to China, there’s one single line in Chinese law to keep in mind. In the United States, animals within theme parks are private property. Even that large talking mouse.
Allow me to introduce you to Article 3 of the Wildlife Protection Law of the People’s Republic of China, as revised in 2016:
Wildlife resources shall be owned by the state.
Yes, you read that correctly. If SeaWorld sends its animals to China, they will be owned by the Chinese government.
And it all kind of makes sense, because when Blackstone’s sale goes through, the Chinese government will be an owner of SeaWorld as well.