NEW YORK -- Paramount Communications Inc. announced Friday it has entered the theme park business by moving to buy four amusement parks and a 20 percent stake in a fifth for $400 million.
'The theme park business is a natural extension of our operations,' said Martin S. Davis, chairman and chief executive officer.
Davis said the parks will give Paramount 'unlimited opportunities to leverage our unique 'software' assets, which include motion pictures, television and publishing, and to expand the live entertainment capabilities of our Madison Square Garden.'
The entertainment-publishing giant said it has agreed to buy Kings Entertainment Co., which owns Kings Dominion, near Richmond, Va.; Great America, in Santa Clara, Calif.; and Carowinds, near Charlotte, N.C. Kings Entertainment also owns 20 percent of Canada's Wonderland, located near Toronto.
Paramount has also agreed to buy Kings Island, a theme park located outside Cincinnati and owned by American Financial Corp. Kings Entertainment operates that facility.
The deal for the Kings Entertainment parks should close in early August, while the Kings Island acquisition should be completed in early October, Paramount said.
Wall Street greeted the news skeptically and Paramount stock dropped $1.625 to $45.625 a share in trading on the New York Stock Exchange.
'I think there's some uncertainty among investors as to what Paramount can bring to the theme-park business,' said entertainment analyst Paul Marsh of Kemper Securities Group in Los Angeles.
But Marsh said that the price Paramount is paying is relatively cheap, considering the cash flow of the properties. He also said Paramount will be able to use licenses to Hanna-Barbera cartoon characters, such as the Flintstones and the Jetsons, at the parks.
Marsh noted that two of the major theme-park operators -- Walt Disney Co. and Time Warner Inc., through its Six Flags operation -- have access to cartoon characters and the synergies those provide. 'There may be some doubt as to how much of the same synergy Paramount can bring,' he said.
Davis has long been expected to make a major acquisition, possibly for a TV network or another studio, and has accumulated a cash hoard of about $2 billion. Marsh said, 'This is not a major acquisition; it's more like Paramount dipping its toe into the theme-park business.'
Paramount said the five parks attract more than 11 million visitors annually and are expected to produce more than $250 million in revenues this year. It also said Nelson Schwab, who leads the group of investors selling Kings Entertainment and serves as the company's chairman and chief executive officer, will continue in those positions at a new Paramount theme parks unit.
Stanley R. Jaffe, president and chief operating officer of Paramount, said the theme parks will expand the distribution chain and the revenue- generating potential of Paramount's creative products.
'We invest more than $1 billion annually creating, promoting and merchandising Paramount products and characters in the North American market,' Jaffe said. 'This creates significant awareness among primary theme park guests, who are also the primary audience for Paramount films and television programs.'
Jaffe said existing rides, attractions and facilities will be re- themed and new attractions added. He also said that acts signed to perform at Madison Square Garden and the Paramount Theater in New York can also be staged at the theme parks' amphitheaters.
New York-based Paramount has posted two straight quarters of significant profit gains. It earned $28.3 million, or 23 cents a share, for the second quarter ended April 30, compared with a loss of $55 million in the year-ago quarter. Second-quarter revenues were $927.9 million, up 6.9 percent from $897.1 million in the year-ago quarter.