Great Canadian Investors Claim Apollo Global Bid Must Be Higher

Article by : Helen Dec 9, 2020

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At the beginning of November, Apollo Global Management, the USA’s alternative asset manager, made an effort to enter the Canadian gambling market. The purpose of this move is to make a bid on Great Canadian Gaming Corp. (GCG). Apollo Global has offered to buy the operator’s shares: the price proposed is $2.52 billion. GCG signed the papers, but the shareholders disagree with the decision and they are not going to remain silent. For this reason, one of the firm’s leading shareholders said that the major shareholders would do everything possible to delay the process of purchasing at least until Apollo Gaming increased the proposed sum.

Apollo has offered to pay C$39 instead of C$28.91 per share, meaning it is a substantial 35% premium of Great Canadian Gaming’s trading price on the date of making the pronouncement. It was recommended that the share bid costs C$39, while the total price for the whole enterprise is C$3.3 billion. However, two major shareholders and Burgundy Asset Management – the company which holds 9.5% of the equity in GCG, are taking actions to prevent the bargain as far as they desire to get more. Burgundy accuses Apollo of being insidious, and the reason for this is a weakened condition of casinos in Ontario.

Apollo and Great Canadian are confident that the offered price is generous and could provide considerable value to shareholders. However, there was immediate pushback from some shareholders, and Burgundy said that Apollo’s actions are the “opportunistic, underwhelming, unsolicited bid.”

We believe Great Canadian’s Ontario assets are irreplaceable properties for which Apollo’s C$39 offer reflects only a fraction of their potential value.

In addition, Burgundy is being supported by such large investment firms as Breach Inlet Capital and Madison Avenue Partners and despite their positions in GCG are weaker, joint forces have more chances to be heard. This transaction is also considered controversial by CI Financial Corporation and BloombergSen Inc. – two major shareholders with significant positions in Great Canadian Gaming Corp. 14% of Great Canadian is owned by a Toronto-based hedge-fund, BloombergSen.

“We will not vote for this deal. We believe risks posed by Covid-19 are manageable and that the British Columbia and Atlantic Canada assets provide a reliable valuation floor for GCG’s stock”, added Burgundy. Those shareholders who oppose the deal say GCG operations have really great capacity in the future. It was estimated that GCG generates between C$17.3 billion and C$30 billion annually. According to Great Canadian Gaming Corporation’s Q3 report, the company has got $43.1m in revenues compared to $341.1m for the same period in 2019. Burgundy also added that despite being challenged by the Covid-19 pandemic, the company stays afloat thanks to assets in British Columbia and Atlantic Canada.

Those Apollo representatives who are eager to make a deal wrote in their statement: “Apollo Funds believe the C$39 per share offer delivers significant and immediate value to the shareholders of Great Canadian, despite the material impacts Covid-19 has had on the business for a prolonged period of time.”

GCG gives the following reasons for approving the transaction:

• Apollo Funds has considerable experience in the gambling market and can effectively manage the Great Canadian business.
• Before the transaction, the long negotiation process under the supervision of the Special Committee took place.
• “ The cash consideration provides value certainty and immediate liquidity.”