Apollo Approval From GCG Shareholders With 15% Higher Bid

Article by : Helen Dec 30, 2020

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Updated: Apr 6, 2023

Great Canadian Gaming is the biggest entertainment provider in Canada. With almost 40 years of experience in the gambling industry, the corporation operates more than 25 gambling, entertainment, and hospitality facilities across Canada. It seemed that the GCG would remain the biggest gambling monopolist in the country for many years. However, the COVID-19 pandemic forced a major shift in the Canadian gambling industry. Last month, Apollo Global Management announced that it would try to acquire the GCG as soon as possible.

GCG shareholders were shocked when they heard that Apollo planned to buy the corporation for around CAD$2.5 billion. They were stunned not because the corporation with 40 years of experience could suddenly change hands, but because Apollo’s bid was way too low. Most shareholders thought Apollo had to return with a much better proposal if its intentions were serious enough. Apollo, in turn, seems to listen carefully to what shareholders think of the deal, so it’s ready to negotiate and dig deeper in its pockets to make shareholders satisfied with the offer.

The initial offer introduced by the private equity firm was CAD$39 per share. The GCG Board had unanimously approved the offer last month, stating that Apollo’s solid experience in the gambling industry would definitely provide new benefits to secure the company’s position as the market leader. However, things changed drastically when shareholders took the floor.

Apollo was truly interested in acquiring the GCG and stated that it would be “committed to working with the management team, regulators and health authorities to allow the company to reopen its properties as soon as it’s safe to do so.”

That’s why it was pretty obvious that the private firm would be ready to increase its bid to CAD$45 a share, which would make the offer worth more than CAD$3.3 billion. At the same time, Apollo could also quit the deal if there was too much pressure from shareholders regarding the bid.

That pressure could likely come from some shareholders that wanted to increase the price to CAD$55 per share, which would end up the deal in more than CAD$4.5 billion, doubling the initial proposal. Even though Apollo’s interest in GCG was high, the company realized that GCg started trading low after the COVID-19 pandemic. Thus, before the pandemic, the GCG’s stock price remained more or less stable at CAD$31.40, but then it dropped to CAD$12.60 and remained extremely low until November when the price reached CAD$24.20. In the first half of December, the price was kept to around CAD$22.60 per share. In the last 5 years, the price had never even come close to CAD$55. The highest value was recorded in February 2019, when it hit CAD$36.36.

Finally, this week, GCG agreed to be acquired by Apollo after the latter had increased its bid by 15% to CAD$45 per share. Peter Meredith, chairman of the GCG Board, said in a statement: “The increased purchase price of C$45 per share unlocks greater value for shareholders, and the company and board appreciate the support of some of Great Canadian’s largest institutional shareholders for this transaction”. Despite the attempt headed toward defeat, more than two-thirds of shareholders voted for the deal this week.