- »Apollo Global Mgt. to Acquire Great Canadian Gaming
Apollo Global Mgt. to Acquire Great Canadian Gaming
The biggest news in Canadian gaming this year is the pandemic, without question.
Not altogether unrelated, a massive transfer of power in the Canadian casino industry is also in process. Great Canadian Gaming Corporation confirmed earlier this month that it entered a definitive agreement to facilitate its acquisition by US-based Apollo Global Management.
While this is a big story, it will undoubtedly grow in scope when Apollo releases its overall plan for Great Canadian Gaming. This may not happen until sometime in 2021.
The November announcement from Great Canadian Gaming noted that Apollo Global Management will acquire it “by funds managed by affiliates of Apollo.” Apollo Funds will acquire all of the outstanding shares of Great Canadian’s common stock at C$39 per share. That puts the value of the deal at approximately C$3.3 billion.
For the foreseeable future, the basics of Great Canadian’s operations will remain the same. Its headquarters will remain in Toronto, and its management and board members will remain Canadian.
One of the mysteries of the deal however, is the potential investors. The press release stated that “certain Canadian institutions may co-invest in the transaction and become equity owners” along with Apollo Funds.
According to CEO Rod Baker, “Factoring in our long-term prospects, this transaction will unlock value for our shareholders at a significant premium to our current share price.”
Baker added that the agreement will support the long-term success of the company. Great Canadian will move forward with its operational and development plans in the coming years, as much as the pandemic allows. He also said, “We believe 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.”
Apollo Partner Alex van Hoek called Great Canadian a leader in the gaming and entertainment industry with opportunities for growth and value. He also acknowledged the effects of the pandemic on the company’s employees and bottom line.
Expected to Move Quickly
Great Canadian’s board of directors approved the deal unanimously. They also issued a recommendation to all shareholders that they approve the transaction at the upcoming special meeting in December.
The deal will require numerous approvals, though they anticipate no delays. The companies are working now to obtain federal regulatory approvals under the Investment Canada Act and Competition Act, as well as by the Supreme Court of British Columbia.
If everything goes as planned, Great Canadian and Apollo expect to close the deal in the second quarter of 2021.
Timing is Everything
Apollo’s confidence in the future of Great Canadian Gaming is exemplified by its desire to conduct this acquisition amidst a pandemic, one that has kept many of the company’s 25 properties in Canada closed for months in 2020.
In fact, every one of its casinos in British Columbia, Ontario, and the Atlantic region closed on March 16, 2020, per the mandate of the Canadian government and coordinating health officials.
Most casinos reopened through the late summer months and into the fall, though all did so under restricted operating conditions and with strict protocols in place. Even so, more shutdowns accompanied a strong second wave of coronavirus cases in October and November.
On the same day of the acquisition announcement, Great Canadian also offered its third quarter financials. The numbers were as bleak as expected. Revenues were down 87% year-on-year for the third quarter of 2020. For the nine months of 2020 through September 30, 2020, revenues were down 62% on the year.
A Closer Look at GCG Financials
It has been a rough year for the majority of businesses, including those in various industries related to gambling. Casinos suffered greatly in 2020 due to the pandemic.
Great Canadian Gaming is only one piece of the affected Canadian realm, but its financial losses are an example of the problems navigated by every gambling-related company.
The current period is not likely to provide much, if any, relief. While there may be subsidies and other financial assistance for some companies and their employees, the bottom line of revenues shows the starkness of the situation.
The breakdown by province provides even more perspective.
It is difficult to decipher which province was hit hardest by the closures and capacity limits. Each took hits of different proportions based on provincial directives at various stages of the pandemic.
Broadening the Impact Across Canada
It is important to examine the impact of the pandemic on Great Canadian Gaming in light of its upcoming acquisition.
However, the pandemic affected gambling across Canada. It will likely be another half-year or more before the full impact of all of the closures and restrictions will tell more of a complete story.
Ten territories offer various forms of legal gambling, and seven regulators across those regions report the revenue from it.
They all file reports based on a fiscal year that ends on March 31, which means the most recent public information for a full year ended earlier this year, just after the pandemic numbers began to climb. Considering not all of them file quarterly public reports or even those with half-year numbers, it is impossible to know the exact effects of the pandemic on that gambling revenue yet.
Revenue posted in the 2019-2020 year from the seven regulators barely touched on the pandemic effects. But all but one of them did show a decrease from the previous year’s numbers even with just a few weeks of shutdown on the books.
- AGLC (Alberta): 3% total revenue drop
- ALC (Atlantic): 1% drop
- BCLC (British Columbia): 3% drop
- Loto-Quebec (Quebec): 1% drop
- MBLC (Manitoba): 2% total revenue increase
- OLG (Ontario): 4% drop
- SLGA (Saskatchewan): 1% drop
Enter Online Gaming Revenue
For those provinces with online gambling and lotteries in place before the pandemic, they were able to direct customers to online options for a variety of games.
As an example, Loto-Quebec recently celebrated the tenth anniversary of its online gaming site. CEO Lynne Roiter took a look at the numbers this summer and estimated that Quebec lost approximately $300 million from March through June as a result of closures. However, it was some consolation that Loto-Quebec could offer lottery tickets and various casino games online to compensate.
Other provinces reported almost immediate increases in online gaming revenue as soon as the land-based gambling halls, casinos, and retail lottery outlets closed.
Variety is the Spice of Gaming
Most provinces offer only one choice of operator for online gambling and lotto games. They like having a monopoly on the province-regulated market. However, players have shown time and time again that they like choices, that they want competition in the market.
This is why Canadians spend approximately $4 billion per year on sites based offshore, according to the Canadian Gaming Association.
Exact figures vary. Alberta estimated that its residents spend approximately $358 million annually on non-Canadian-based sites. And Ontario estimated that people within its borders wanted competition for OLG so they spent about $500 million on offshore sites.
Our data shows that people from all parts of Canada read our reviews of the top-ranked casinos online and use our bonuses to establish new accounts on those sites. Of course, more people hail from places like Alberta, which didn’t have an online site of its own until very recently. But quite a few Canadians choose gambling sites not run by the government, as evidenced by the high number of players we see from places like Quebec, Ontario, and British Columbia who seek other choices.
Benefits of Online Gambling Choices
There are thousands of online casino sites, most of which are available to Canadian players.
A site like ours narrows that unmanageable number down to about two dozen operators. All are licensed by at least one of the world’s most respected gaming regulators, and all sites meet our multi-faceted criteria for safety and security.
Most of the sites offer a range of games, from video slots to video poker, and from table games like blackjack to online keno, lotteries, and scratch cards. Most of them have forms of poker, but several are affiliated with poker sites, such as 888casino and Bodog Casino.
Land-based Survives but Online Thrives
Online gambling continues to become more popular by the year but never as fast as during the year of the pandemic. With people around the world relegated to their homes for months, the desire for entertainment prompted many to discover the world of i-gaming for the first time.
Some will return to the land-based casinos and gambling halls in the coming months and years. As evidenced by the throngs of people patronizing the casinos throughout Canada when they did reopen, gambling in person will always be popular.
The future of gambling is likely going to transform into a hybrid of live and online options. If nothing else, the pandemic showed the intrinsic value of internet gambling for any society that depends on gambling revenue for its economic security.
While online casino gaming is easier and more convenient, some Canadians do anxiously await the chance to return to their gambling entertainment venues.
That time may come in 2021.
End in Sight for Covid-19?
Vaccines developed in Russia were approved as far back as August 2020, but the lack of trust in the regulatory process in Russia prevents most other countries from seeking doses of those vaccines. And while there are reportedly about 150 vaccines in various stages of development around the world, many are pinning their hopes on the United States.
Canada is keeping its focus on the several pharmaceutical companies that announced plans to apply for final approvals of vaccines in the United States. Several are currently awaiting approval by the US FDA (Food and Drug Administration), including the following:
- BNT162b2 by BioNTech, Fosun Pharma, and Pfizer to be reviewed December 10, 2020
- mRNA-1273 by Moderna, NIAID, and BARDA
- COV2.S by Janssen Pharmaceutica (Johnson & Johnson) and BIDMC
The latest estimates from American medical professionals indicate that the first doses of one of the above vaccines may be approved, produced, and ready for distribution by the end of December 2020. However, the first distributions of any vaccine will go to health care workers, other first responders, and those working the front lines of the pandemic. Nursing home residents and those with severe medical vulnerabilities will likely be next, followed by all seniors, students, and so on.
It could be well into 2021 before the vast majority of North Americans – and others around the world – receive the opportunity to be vaccinated.
Meanwhile, those same pharmaceutical companies are seeking approval from Health Canada.
Canadian officials have been in talks with their counterparts in the American government – and others around the world – to secure doses. In fact, the Duke Global Health Innovation Center revealed that Canada “has made deals to buy more doses per capita than any other nation.”
Even with a vaccine, though, it is unlikely that all gamblers will return to live venues anytime soon. The information many people now possess about germs and susceptibility to illness may keep some away from live venues forever.
Future of Canadian Gambling Revenue
It is inevitable that most provinces in Canada will invest more intensely in online gambling options going forward. But most won’t find their online footing until the worst of the Covid-19 pandemic is over.
Is it possible to determine the damage that coronavirus will continue to wreak on provincial revenues? Simply put, no.
Each province depends on gambling at different levels. Some are affected more by the lockdowns because they have no online gambling options for customers. Others have fewer casinos and more lottery revenue, the latter of which hasn’t been as drastically affected as that of brick-and-mortar gambling establishments. There are many, many variables.
Let’s go back to Great Canadian Gaming for some lessons learned in 2020.
- Be open to new relationships. The right partner can help pull you through the bad times and create new opportunities when the good times return.
- When gaming and hospitality closed completely, the only revenue was take-out food from restaurants and leases. The more revenue streams, the less likely you are to lose it all.
- Obey the rules. No matter how much they hurt, like the lockdowns hurt Great Canadian, they sucked it up and followed protocols. When their acquisition comes up for approval by regulators, they are more likely to be looked upon with favour.
- Push for legalized sports betting in Canada. Lawmakers realized this year that more revenue streams, like single-event sports betting online, would have helped many gambling companies.
- Consider all online expansion. Most provinces do not allow for internet gaming outside of the state-owned monopoly. Talk to lawmakers about the benefits of allowing land-based casinos to offer their own online gambling options.
What is known for certain is that online gambling has been available and will continue to provide options for gamblers whether live venues are open or closed. Canadians spend billions on those sites each year.
With any luck, Apollo’s affiliates will be associated with online gambling entities that will take Great Canadian into the online world at some point. Millions of players are already there.