Oppositions to Low Bid Threaten Apollo Deal for GCG

This takeover clearly didn’t go as planned.

Apollo Global Management’s planned acquisition of Great Canadian Gaming Corporation made headlines across Canada and the gambling world when announced in November. The $3.3B deal proposal seemed certain, with all board members immediately supportive.

Shareholders, however, were not as open to the idea. Not only did they begin speaking about their objections, some top shareholders officially rejected the bid.

All of this brought Apollo and Great Canadian executives back to the table to find a way to make the deal more palatable for everyone. Some say that Apollo is even considering increasing its bid with a new offer.

It Was a Big Deal

On November 10, Great Canadian Gaming Corporation announced that Apollo Global Management would be acquiring all outstanding shares of its stock. The price was C$39 per share, which valued the entire deal at approximately $3.3 billion.

Great Canadian Gaming would keep management and board members, all Canadian, and the headquarters would remain in Toronto.

It seemed to be good timing. The year 2020 was absolutely brutal on the Canadian economy in general and hit the land-based gambling industry hard. Many of the Great Canadian 25 casino properties kept their doors shuttered for more than a few months, due to the coronavirus pandemic and related mandates. Even reopening protocols dictated limited capacity. The financial pain was substantial. And a full recovery to pre-pandemic may not come until 2021-2022.

Apollo and GCG were confident that the deal would sail through regulatory and shareholder approvals. They hoped to close the deal in the second quarter of 2021.

Shareholders Not Impressed

While the Great Canadian Gaming board of directors unanimously approved the deal with Apollo, shareholders were not so excited.

Fund managers with BloombergSen and CI Financial Corporation, the top two shareholders in GCG, expressed concern that the sale price was too low. “They’re selling a Canadian monopoly asset at rock-bottom prices to foreign buyers,” BloombergSen President Sanjay Sen stated.

A representative from Apollo responded to the concerns by countering that the price “delivers significant and immediate value” for shareholders. That person also stated that Apollo brigs valuable experience in the gaming and hospitality industries to the deal and will be able to grow GCG.

Dollars and Cents

The bottom-line issue at the core of the objections seemed to be the share price. Earlier this week, Bloomberg reported that Apollo was reevaluating its strategy for the acquisition, considering a higher offer. However, the company worried that the pain of the pandemic would prove costlier than anticipated.

Since Apollo had previously considered up to C$41 per share, a revised offer could stay in that range and possibly calm shareholder concerns.

Shareholders point to a high trading price of C$45.80 in February of this year, citing that as closer to the current value of the company before the pandemic changed everything. Some shareholders even indicated that the acquisition price should be closer to C$70 per share.

That created quite a chasm between the current deal on the table and a price that would bring the largest shareholders on board.

CI and ISS Say No

Bloomberg followed up with news later this week, and it wasn’t good for Apollo and Great Canadian.

CI Financial affirmed its opposition to the deal and reported that it will be voting against it. CI Financial holds 14% of the shares via a variety of funds invested in GCG.

Further, more shareholders expressed their disapproval of the proposed deal. Glass Lewis & Co said that the timing of the deal makes Apollo looks opportunistic. “We do not see compelling evidence that the proposed buyout is in the best interests of shareholders at this time,” Glass Lewis stated.

Institutional Shareholder Services also reported its concerns. “The ongoing recovery among gaming peers suggests that the company could return to historical valuation levels as the operating environment normalizes over time,” ISS said. Due to this, shareholders cannot be confident that this deal represents an adequate value.

Burgundy Asset Management signified its opposition to the deal as well. These three, along with BloombergSen, comprise approximately 37% of the shares.

Down to the Wire

Since the deal requires a two-thirds approval from voting shares, it appears that the deal will not move forward as it stands.

Voting is set to conclude at 11am on Monday, December 21. Then, a virtual meeting of securityholders is set for December 23. Next week, it will be clear if Apollo intends to increase its proposed offer or let the deal fail and walk away.

Meanwhile, Great Canadian recently closed another one of its casinos in Ontario due to the worsening second wave of Covid-19 cases. GCG shows 19 of its 25 properties now temporarily closed.


Jennifer Newell

Jennifer Newell

Jennifer Newell has been writing about poker and gambling since 2004. From her days in the WPT offices to covering summers of WSOP tournament action, she also followed gambling legislation to Washington D.C. and women-only poker to the Bahamas. Meanwhile, she lived in Los Angeles and Las Vegas for many years before moving back to her hometown of St. Louis, Missouri. Now, Jen travels less, writing about poker and online gambling from her home with her two dogs watching her every move. In her spare time, she follows politics, works on her never-finished novels, and learns Italian in the hopes of retiring to Italy someday.

If you want to know more, you can follow Jen on Twitter @WriterJen


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