updated 8/25/2005 5:52:11 PM ET 2005-08-25T21:52:11

Six Flags Inc. is putting itself up for sale at auction, one week after Washington Redskins owner Dan Snyder bid to raise his stake in the amusement-park operator and oust Kieran Burke as chairman and CEO. Its shares rose 11 percent.

Six Flags, the world’s second biggest theme-park operator after The Walt Disney Co., said Thursday it would invite dissident shareholder Red Zone LLC — an investment firm controlled by Snyder — to participate in the auction.

But it also said it opposed Snyder’s attempt to gain control of the company through a tender offer for that would boost its stake in Six Flags to just under 35 percent.

Details of the board-authorized auction were not spelled out. Six Flags did not offer a timetable, saying only that it would be thorough and prompt.

Shares of Oklahoma City-based Six Flags rose 72 cents to close at $7.26 on the New York Stock Exchange. With 93.1 million shares outstanding, the company’s market capitalization is roughly $676 million.

The company had $2.3 billion in long-term debt at the end of the second quarter on June 30. Interest on that debt would be more than $200 million a year, said consultant Dennis Speigel, president of International Theme Park Services Inc. in Cincinnati.

“They’re saddled with such huge debt,” Speigel said. “It’s really going to take some creative board room strategizing on the parts of investment bankers.”

Analysts Kathy Styponias and Aaron Bearce of Prudential Equity Group wrote in a report Thursday that they didn’t see any likely bidders besides Snyder in the market. Large media conglomerates are looking to expand in internet and cable businesses and Viacom Inc. — the only conglomerate other than Walt Disney Co. that has theme parks — is viewed as a seller of parks, the analysts wrote.

The analysts viewed theme park operator Cedar Fair as a potential buyer, but considered the acquisition too “dilutive” since it has only 12 parks and would be buying Six Flags’ 30 parks.

Private equity groups would also be unlikely to take on Six Flags’ debt, especially considering that few other buyers exist if the company were turned around and sold again, the analysts wrote.

Last Thursday, Red Zone said in a letter to shareholders it sought to boost its stake to 34.9 percent from a current 11.7 percent, and would offer $6.50 per share — valuing the entire company at about $605.2 million. However, the tender offer is contingent upon the replacement of Burke and Chief Financial Officer James Dannhauser.

Karl Swanson, a spokesman for Snyder, said Red Zone was waiting for more information.

“We haven’t received any details of the auction,” Swanson said. “We’ll be happy to see just how they intend to do it.”

Six Flags said putting itself up for sale was “the best way to deliver full and fair value” to shareholders, particularly given Red Zone’s proposal, which it called an attempt to wrest control of the company without providing value to all shareholders.

Under Snyder’s plan, Mark Shapiro, a programming and production executive at Disney’s ESPN cable networks division, would become CEO of Six Flags, while Snyder would become chairman.

In its letter to shareholders, Red Zone claims Six Flags has about $2.6 billion in “poison debt” that it could be forced to repay if it took a majority position on the company’s board.

In order to avoid triggering that debt, Snyder has sought only to boost his stake in the company and hasn’t bid for full ownership. If half of the company’s shareholders support his proposals, he would gain three seats on the board and could attempt to run the company using a minority stake, and in the process avoid taking on Six Flags’ debt.

Six Flags, however, contends that the debt is not intended as a “poison pill” to deter buyers.

“There is nothing in the company’s debt provisions that would prevent an interested party from acquiring all of the outstanding shares,” a Six Flags spokesperson said.

Six Flags, which was part of Time Warner Inc. in the early 1990s, was purchased by Premier Parks Inc. for $1.9 billion in 1998. Premier Parks adopted the Six Flags name two years later. It built up most of its debt through the purchase of theme parks.

The company has posted annual losses each year since 1999.

Snyder’s group has indicated it would get rid of properties that aren’t critical to the management plan, rework the company’s advertising and marketing strategies, create strategic relationships with vendors and generally establish a “clean, safe and fun” image for the company.

Six Flags’ stock price has vaulted nearly 37 percent since Red Zone first disclosed its intent to raise its stake in the company. The company reported a profit in its second quarter ended in June.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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