Apollo Mulls Upping Bid for Great Canadian Gaming After Investors Scoff at Initial Offer

Posted on: December 14, 2020, 11:41h. 

Last updated on: December 14, 2020, 01:36h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Private equity firm Apollo Global Management (NYSE:APO) is considering boosting its $2.5 billion acquisition offer for Great Canadian Gaming Corp. (GCGC). The deal comes after several large investors said that proposal is inadequate.

Apollo GCGC
Great Canadian’s Casino Nova Scotia in Halifax (left) and Sydney. Apollo could lift its takeover offer for the company. (Image: Nova Scotia Buzz)

Apollo’s current bid values the casino operator at C$39 a share, in the $C38 to C$41 range the prospective buyer said it was considering when the offer was revealed in regulatory filings in August. While the private equity shop could increase its offer for GCGC, it’s also possible it could scrap the deal altogether if it feels an unnecessarily high proposal is needed to get investors to play ball.

At the same time, Apollo is wary of overpaying because of the risks the pandemic poses to the gaming industry,” Bloomberg reported earlier today, citing unidentified sources familiar with the matter.

Vancouver-based GCGC operates 25 gaming venues on both Canadian coasts and Ontario, the country’s most populous province. The company’s board unanimously approved the private equity offer in November. It cited Apollo’s “extensive experience in the gaming sector will provide additional strategic benefits to help expand our gaming and hospitality offerings and to secure our position as a long-term market leader.”

Investors Say Not So Fast

GCGC’s board was swift to approve the offer. But some major shareholders were also quick to say they wouldn’t be voting in favor of the $2.5 billion pitch, saying it undervalues the target.

Last month, Burgundy Asset Management, a Toronto-based money manager that owns 9.5 percent of GCGC’s shares outstanding, said it has no intention of voting in favor of the Apollo offer in the current form. Burgundy is the third-largest investor in the gaming company, but far from Apollo’s only problem.

BloombergSen and CI Financial criticized Apollo’s offer, with hedge fund BloombergSen calling it “terrible and ridiculous.” That firm controls 14 percent of GCGC equity. The companies are the casino operator’s two largest shareholders.

Creating more potential headaches in the GCGC shareholder ranks are Madison Avenue Partners and Breach Inlet Capital, a pair of US-based asset managers with smaller positions in the gaming company. Those firms don’t like Apollo’s offer, either.

Burgundy believes Apollo is leveraging the effects of the coronavirus pandemic on GCGC’s business to make a lowball offer, and that when things return to normal, the target will realize significant benefits from its Ontario operations, which aren’t accounted for in the $2.5 billion proposal.

Still Searching for Gaming Deals

It remains to be seen if Apollo increases its offer for GCGC, or if it decides to throw in the towel. If the latter scenario comes to pass, it would be the second gaming deal Apollo strikes out on this year.

The private equity firm was interested in UK-based sportsbook operator William Hill, but lost out on that transaction to Caesars Entertainment. Apollo is rumored to be a logical suitor for the bookmaker’s European operations, which Caesars will almost certainly divest after finalizing the takeover.

Apollo found some success on the gaming acquisition front last week. The success came when affiliate Gamenet Group S.p.A paid $1.15 billion for the Italian digital gaming, gaming machine, and sports wagering assets of International Game Technology (NYSE:IGT).