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SeaWorld Entertainment, including San Diego's facility and Chula Vista's Soak City water park, intends to go public this week at between $24 and $27 a share (likely $25.50). In my judgment, this one shines and stinks like a rotten mackerel in the moonlight. Dan Freed of The Street.com used a similar analogy when he wrote about the preliminary deal in late December: it "stinks like a rotting whale carcass." This is one of those deals in which a private equity organization, Blackstone Group, bought the company from Anheuser-Busch in 2009, then loaded it up with debt to pay off the acquirer. In December, Blackstone had already jacked up Sea World's debt load to the tune of $610 million to pay itself two dividends, points out Freed.

At $25.50, the net proceeds should be $231.3 million, says the initial public offering prospectus. Nary a penny goes to the company. The money goes to pay off debt. Here is a key line from the prospectus: Blackstone and co-investors purchased 100% of SeaWorld in 2009 "through SW Cayman LP, SW Cayman ALP, SW Cayman BLP, SW Cayman CLP, SW Delaware DLP, SW Cayman ELP, SW Cayman FLP, SW Cayman Co-Invest LP, SW Cayman (GS) LP, and SW Cayman (GS) LP." If you were paying attention in the 2012 election, you learned how private equity groups use offshore tax and secrecy havens, particularly the Cayman Islands, to get around United States regulation or taxes, or both, although Mitt Romney said otherwise. "So who owns SeaWorld and all its confusing chain of subsidiaries?" asks Freed. "Lots of shell companies, most of which have the word Cayman in the in the title." (The Caymans are supposedly great for snorkeling, so maybe SeaWorld is expanding its ocean mandate.)

SeaWorld is still loaded with debt, the prospectus warns. And here's another warning from the prospectus: if you pay $25.50 a share, you will have immediate dilution of a whopping $24.33 a share. Blackstone, which paid less than half what you will, retains 73.8% ownership. Quartz, a digital financial publication, points out that SeaWorld will sell for 27 times earnings, while competitor Six Flags sells for a 12.1 multiple and Disney 19. "Sea World's revenues, $1.4 billion last year, look good, until you compare them to Disney's. The latter's parks and resorts brought in $12.9 billion." says Quartz.

Bottom line: you will be paying an extremely stiff price for an outfit controlled by questionable insiders.

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Comments

Visduh April 12, 2013 @ 8:38 p.m.

Full circle. Wasn't Sea World locally owned until Jovanovich of HBJ came along and bought it up, during some stressful times, to add to his publishing "empire?" Then Busch bought it to add to their string of Busch Gardens operations and add some allure to theirs. By that time Sea World was in such odd spots as San Antonio and some spot on the Great Lakes (wasn't Cleveland, was it?). All good things come to an end, and that happened when InBev, the Belgian industrial brewer paid a fat price for the #1 US suds slinger, Anheuser Busch, in 2008. The Belgians didn't want into the amusement park biz, and they soon peddled it to this Blackstone operation.

So for the local nostalgia freaks with some money to throw away, stock in Sea World (gasp!) is now available. Be sure to hurry down and buy some. It isn't every day you can buy stock in one of your favorite places.

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Don Bauder April 12, 2013 @ 10:07 p.m.

Visduh: I am quite sure Sea World was not locally owned. It went public some time in the 1960s or 1970s, I believe, when it had only 3 parks or so. I remember going to the opening in Cleveland back in those days. Yes, HBJ had it, and then Anheuser-Busch, and then when the Belgian company bought A-B, it decided to get out of the business. Best, Don Bauder

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Visduh April 14, 2013 @ 7:47 p.m.

Did you ever find the notion that SEA World, with all of its open ocean and warm water imagery, somehow fit Cleveland on the shores of "beautiful" Lake Erie, to be odd? San Antonio, many, many miles from the sea, and located on a river, was a most odd spot for a marine park too.

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Don Bauder April 14, 2013 @ 9:17 p.m.

Visduh: The Cleveland Sea World, which I think has long since been closed, was not near Lake Erie, as I recall, but I visited there only once a long time ago. The location had a couple of strikes against it: first, it was closed a good part of the year because of the weather, and, as the Cleveland economy declined, there were fewer consumers interested in attending. The San Antonio park at least could operate more months of the year. Best, Don Bauder

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Don Bauder April 15, 2013 @ 8:49 a.m.

HISTORY: I checked a couple of things. Sea World was based in San Diego initially. It went public in 1968 and then was later sold to HBJ and then to Anheuser-Busch. The Cleveland Park was sold a couple of times and closed in 2007. Best, Don Bauder

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tomjohnston April 15, 2013 @ 10 a.m.

It wasn't Cleveland SeaWorld. It was SeaWorld Ohio. My wife and I went to it probably 25 yrs ago at least, on our first visit to Cleveland. It was in Aurora, which is kind of half way between Akron, which we also visited(well Fairlawn, actually). There is still a water park there, but I don't know how much of the old SeaWorld property is still intact. it's called Water Kingdom or something like that. I still have distant relatives in the area. A few of them worked at SeaWorld Ohio back in the day.

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Don Bauder April 15, 2013 @ 10:21 a.m.

tomjohnston: I didn't mean to say it was called Cleveland Sea World. It was called SeaWorld Ohio, and was roughly halfway between Cleveland and Akron. After it closed in 2007, a portion of it was used for a water park, Wildwater Kingdom, which still exists. Best, Don Bauder

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tomjohnston April 15, 2013 @ 12:14 p.m.

"it was called Cleveland Sea World. It was called SeaWorld Ohio, and was roughly halfway between Cleveland and Akron.'' Déjà vu. I could swear that I've read that somewhere before. Oh yeah, I have. When I wrote it in my previous comment. LOL

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Don Bauder April 15, 2013 @ 1:56 p.m.

tomjohnston: Imitation is the highest form of flattery. Best, Don Bauder

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tomjohnston April 15, 2013 @ 12:53 p.m.

I had to look this up to be sure, but my recollections were correct. SeaWorld was privately held rom the time SeaWorld in SD first opened in 1964 until they took it public in 1968. It was opened by 4 UCLA frat brothers. (By coincidence, one of the 4, George Millay, was one of the owners of the company that started the 94th Aero Squadron chain, which happens to be mentioned elsewhere in the Reader). Personally, I boycotted SeaWorld while it was owned by HJB. They bought Marineland in 1987 and promised to keep it open. Instead, they closed it about a month after the sale closed and moved the orcas to San Diego.

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Don Bauder April 15, 2013 @ 2 p.m.

tomjohnston:At the time HBJ bought SeaWorld, the book company had two headquarters, and one was San Diego. I was writing a book for HBJ around that time and remember that some employees were skeptical. However, it may not have been a bad diversification move, but HBJ ran into a lot of problems in its main business. Best, Don Bauder

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Duhbya April 15, 2013 @ 11:39 a.m.

Blackstone Group, eh? Brings to mind the infamous Blackwater from a decade ago. I smell a cheneyfish.

None

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Don Bauder April 15, 2013 @ 2:02 p.m.

Duhbya: One of the founders of Blackstone was billionaire Peter Peterson. He is the guy who, through his foundation, wants to cut government entitlements drastically. Best, Don Bauder

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Duhbya April 16, 2013 @ 7:06 a.m.

Then I'll take a moment to insert another Dorothy Parker quote:

“If you want to know what God thinks of money, just look at the people he gave it to.”

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Don Bauder April 19, 2013 @ 7:39 a.m.

Duhbya: Yes, that was one of Dorothy Parker's more delightful quotes. She had so many. Best, Don Bauder

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Don Bauder April 19, 2013 @ 7:46 a.m.

SEAWORLD ENTERTAINMENT LEAPS AT OPENING. The initial public offering of SeaWorld Entertainment leapt 16.11% at today's (April 19) opening. The park chain offered 26 million shares at the peak of its expected range, $27. As of now, it is trading at $31.35. Best, Don Bauder

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Don Bauder April 20, 2013 @ 8:28 a.m.

SEAWORLD SPIKES 24% ON FIRST DAY. SeaWorld Entertainment zoomed 24.15% to $33.52 on its first day of trading yesterday (April 19). The company wound up its first day of trading with a market capitalization of $3.1 billion. Such a level is "quite simply, insane," says Rick Smith of Motley Fool. SeaWorld sells for a whopping 40 times earnings, compared with competitor Six Flags's 11 times earnings, and Cedar Fair's 23. If SeaWorld's heavy debt is factored in, "we're arguably looking at an enterprise costing 64 times annual earnings and 44 times free cash flow," says Smith. What he doesn't mention is that initial public offerings (IPOs) are generally manipulated. They are avenues for insider sharks to dump at a whale of a profit. Best, Don Bauder

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