Activist shareholder and Washington Redskins owner Daniel Snyder was named non-executive chairman of the board last week, and his partners in investment company Red Zone, who have publicly charged Six Flags with mismanagement and poor marketing, have won three out of seven board seats. Off the board at the theme-park operator are Chairman-CEO Kieran Burke, Chief Financial Officer James F. Dannhauser and Stanley S. Shuman, managing director of one of the company's investment bankers.
In his bid to gain control, Mr. Snyder has blamed management's oversight of the company, especially marketing, as the root cause for losing $2.6 billion in shareholder value in six years. In turn, Six Flags management has accused Mr. Snyder and Red Zone of trying to destroy its sale process and "assume control of the company without paying for it."
The battle has been publicly fought in filings with the Securities and Exchange Commission, escalating over the last three months. In an Oct. 7 proxy filing with the SEC, Red Zone declared "it's time for a change," asserting that Six Flags management lost shareholder value by mismanaging the company while being "handsomely compensated."
Under the thesis that the parks are skewed toward teens and thrill-seekers at the expense of families with young children, Red Zone in the filing accused Six Flags of misallocating capital and using the wrong marketing strategy. It said the company overspent on thrill rides that don't appeal to families with young children and noted some rides were out of commission for several weeks for repairs. It also said the "expensive marketing campaign anchored by Mr. Six is misguided" and "weakens the brand."
`Clean, safe and fun'
Accumulating 11.7% of company shares over a year to become the largest shareholder of the company, Red Zone claimed it has a vested interest in improving the park operator's fortunes by repositioning its brand as "clean, safe and fun."
Mr. Snyder further argues in filings that Six Flags' advertising and marketing had no clear message; targets only one of two key demographics; is expensive and lacks co-branded marketing. He also said the company has too few strategic concession relationships, and those are with tired and dated brands not recognized by children.
Mr. Snyder wants to target mothers and young children as well as teens; use more targeted, direct marketing and sell category-exclusive rights to food items with name-brand food marketers. He also proposes renaming rides and attractions with paid sponsorships and to charge fees for exclusive "official sponsorships" with "more modern" brands like action sports, movie celebrities and musicians.
In an Oct. 18 filing, Six Flags responded with 43-pages charging that Red Zone was attempting to seek control of the company without paying a premium to benefit all shareholders. It said Red Zone had no new constructive ideas; that its proposals were ill-conceived and would interfere with a plan that is working; and that Red Zone would saddle the company with inexperienced and potentially conflicted management.
Six Flags maintained that the entire theme-park sector was affected by the economic downturn, Sept. 11 attacks and especially poor weather. Its filing detailed the "huge success" of Mr. Six, including being named "most likable ad" by Advertising Age and "most memorable" ad by USA Today tracking.
The marketer countered Red Zone's argument that it targets only teens, saying 70% of its annual media spending targets women ages 25 to 49 and that 93% of mothers said they've seen the ads vs. 94% of teens.
The company cited Millward Brown research that showed 89% of mothers and 87% of teens say Mr. Six does a good job of representing the company as its ambassador of fun. Some 88% of mothers and teens said they would enjoy a day at Six Flags based on the Mr. Six character. The filing also defended the track record of its agency, independent Doner, Southfield Mich., citing its work for Mazda, La-Z-Boy and Serta.
Doner referred calls to Six Flags. Neither Six Flags nor Red Zone returned calls. Six Flags said in its filing it has boosted year-to-date revenues through Sept. 30 by 9.2%. The company posted earnings of $28.1 million for the nine months ended Sept. 30, up from the $109.5 million loss for the same period a year ago.
In the filing, signed by Mr. Burke, he said Red Zone would abandon the ad campaign that Six Flags believes is necessary for maintaining top of mind awareness over the season. He argued that Mr. Six campaign targets both mothers and the teen market, which represents 30% of annual attendance.