PROLOGUE – “Corporate Culture” – as presented
We heard a presentation last week by Selim Bassoul, currently CEO of Six Flags Entertainment Corp., and was impressed with his progressive, inventive, intensely dedicated, obviously “hands on” and long term driven approach to re-inventing the 27 theme parks within Six Flags. Most of all, the management principles discussed seemed especially descriptive of a “corporate culture” that every hospitality driven executive strives for. Bassoul may or may not match his outstanding previous success, at the Middleby Corporation, especially considering the doubling of Six Flags by way of their pending merger with Cedar Fair, LP and their 15 parks. An additional level of uncertainty is contributed by way of his new role, at 70 years of age, as Executive Chairman, rather than CEO. Independent of results in a different time and place from his previous situation at Middleby, there is no doubt a great deal to be learned from this dynamic individual.
OUR PURPOSE HERE – per Yogi Berra: “You can observe a lot by just watching.”
We will watch with great interest, and report accordingly to our readers, as this merger takes place, but the primary purpose of this message is to introduce Selim as a “visionary” in terms of discerning the current requirements of today’s consuming public. His presentation convinced us that he is a step ahead of most hospitality-oriented executives and has been making the large “disruptive” bets designed to separate his goods and services from commodity-like competition. In that context, we will describe Selim’s background, consistent business accomplishments over decades, and some of his operating principles.
SELIM BASSOUL – BACKGROUND
Selim Bassoul, now 70 years old, was born in Lebanon. He received a BA in Business Administration, with distinction, in 1979 from the American University of Beirut. He moved to America and received his MBA from the Kellogg School of Management at Northwestern University, and he gratefully recalls that his parents financed this by selling some land they had been saving for retirement. He has recalled three lessons from that time: (1) Evaluate the risk/return equation (2) For every action, there is a reaction, whether a competitor’s strategy or capex or borrowing to get there and (3) Cash is king.
After his studies, he worked in the healthcare industry, for American Hospital Supply and Baxter Healthcare, for eight years, including M&A transactions and corporate planning. He then spent eight years in commercial food service equipment, with Premark, Inc., as director of marketing, and VP of sales for their Vulcan cooking division.
HIS REIN AT MIDDLEBY – and the lessons within that effort
Bassoul “made his bones” at the Middleby Corporation, where he became COO, with a pay cut, in 1999 and CEO in 2001. In that course he sold the “dreamhouse” he had just built to buy shares in Middleby, becoming the second largest shareholder. Without detailing his two decades at Middleby, suffice to say that (including many acquisitions) revenues grew from $100M to $2.7B, operating income from $12M to $535M, and market capitalization from $100M to over $6B.
Illustrative of his success in building a corporate “culture”, annual turnover went from 30% to 2%, and some of his principles are worth describing. “It’s important to retain the talent, because it builds loyalty. People who’ve been with you help hire people they know……I promote the idea of having families working for me…..husbands and wives, parents and children working for each other and reporting to each other…..they now have leverage to say, ‘we have to succeed together’……I give them full empowerment….and people adore this…..the common thread I’m looking for is a huge passion to win. A winner gets up every morning and comes to work wanting to learn, to be a change agent…everybody in your organization matters….and I only allow three degrees of separation…it’s about staying connected with all facets of the organization…..I don’t want a whiner working on my team, the ‘sniper’ where it’s always somebody else’s fault, or the ‘contaminator’, who is very smart but uses all their intelligence to undermine…….30% of my time is allocated to …learning trends and what the customer is interested in… 30% is spent on ‘people issues’, making sure his team is incentivized correctly……and making sure they get the resource they need…..the next 30% is focusing on the type of disruptive technology and total engineering innovation that no customer is going to give you….where you take a risk and do something beyond the norm, nobody told Steve Jobs you need to create an iPhone or an iPod……the final 10% is spent in prayer…..about God guiding me to keep a purpose in my life….because I was one of the lucky few able to leave Beurut I’ve realized you have to give back.”
There is obviously a great deal more that could be described relative to Bassoul’s twenty years at Middleby. The “cultural” elements described above no doubt only scratch the surface.
AT SIX FLAGS SO FAR – great progress, however…….
Selim Bassoul was appointed CEO and President in November, 2021, at the time still adjusting to the effects of Covid. Over the course of the last 30 months, Bassoul has been implementing the principles described above and many more. Philosophically, he has tried to challenge every assumption and turn over every rock, in an effort to encourage guests to spend more time and come more often as they leave (with pleasure) more of their discretionary income. His “disruptive” innovation approach is pursuing a general “premiumization”, including improvement of food service, more productive use of technology at many levels, simplification of admission and customer experience combinaions, more immersive and satisfying coming and going event experiences, improvement of the customer price/value equation. While the last two years have been focused on general “premiumization” of the guest experience, beautification of facilities and an intensified effort to provide a fun filled experience for employees (which will in turn engage guests) ’24 and ’25 will involve the highest ride-directed capex in history. In the meantime, on top of the above a greater focus on special events, including holidays and birthdays, has been implemented.
As part and parcel of Bassoul’s intense involvement with all levels of his Company, he reads a vast array of social media commentary and personally visits the parks regularly.
With all we have described above, Bassoul’s progressive, innovative, disruptive approach, in an effort to create a superior price/value experience for the park visitor, has delivered important tangible results. Compared to pre-pandemic, guests are spending more time in the park and leaving 40% more of their dollars. In calendar 2023, attendance was up 9% year to year. Employees seem more engaged than ever and social network reviews have been complimentary.
However…. financial targets have yet to be met. Adjusted EBITDA was essentially flat in ’23 vs. ’22, at $462M. The historically high inflation, challenging weather, supply constraints and some non-recurring financial adjustments have inhibited results. Management also admits that every strategic element has not been successful. The events calendar, for example, has apparently left room for improvement, while technology applications have not been as productive as hoped, including their approach to dynamic pricing.
Summarizing results at Six Flags under the Bassoul reign: very promising but yet to pay off – with a great number of moving parts.
AS IF THAT’S NOT ENOUGH – ENTER CEDAR FAIR
Six Flags is about to combine with Cedar Fair LP, in essence a “merger of equals”. Six Flags’ shareholders will own 48.8% and Cedar Fair 51.2% of the new company. The following table provides a broad comparison. It is expected that the combination will take place by the end of June ’24. Richard Zimmerman, President and CEO of Cedar Fair, will serve as President and CEO of the new combined company. Selim Bassoul, President and CEO of Six Flags, will become the Executive Chairman of the company’s board of directors.
Another time we will discuss more details and then the progress of the combination. For the moment, the Company’s investment presentation indicates that: Within two years, $200M of post merger synergies can be implemened and within three years, about $80M of EBITDA can be added by way of: $40M from an enhanced Season Pass Program and Optimized Flash Pass/Fast Lane Program and $40M from Improved Food & Merchandise as well as an expanded IP portfolio. It is also worth noting that the Net Leverage of the combined company, starting at 3.7x (relative to pro forma Q3’23) is expected to be reduced to 3.0x within two years.
CONCLUSION
This discussion has been designed to focus on “culture”, rather than facts and figures. The vehicle has been Selim Bassoul’s extraordinary success over twenty years prior to and including his current role at Six Flags Entertainment. We intend to report periodically as Bassoul and his “partner”, new CEO Richard Zimmerman (whom we do not know), attempt to install and improve upon the cultural elements described above. We have yet to visit a Six Flags or Cedar Fair facility, so have no idea how challenging their task might be. Our experience informs us, however, that the cultural improvements that will increase guest satisfaction may be more time consuming and expensive (in a $3.4B company with 42 far flung locations) than Bassoul and Zimmerman would like. In the meantime, the management principles are admirable, no doubt worth emulating in large measure, and we will try to learn what we can as results are disclosed.
Roger Lipton