Great Canadian Gaming Corp is being sold. In fact, it is a $3.3 billion takeover by Apollo Global Management Inc. this means $39 per share for the casino company. This is about 35 percent above Great Canadian’s recent value; however it falls short of what it is worth per some investment analysts.
The stock stands at $38.90, its highest close since early March. While the company runs 25 gaming, entertainment and hospitality facilities – primarily in Ontario and British Columbia – it has suspended most operations due to the pandemic.
CEO Rod Baker has led the company for about a decade. He maintains that independent directors have thoroughly analyzing Apollo’s offer, yet Great Canadian Gaming has not approached other potential investors.
“This is a very, very strong offer and reflects all of the potential of the business — factoring in a very difficult and uncertain period for some amount of time.”
According to Apollo, Great Canadian will remain headquartered in Toronto, led by a Canadian management team, but Baker and his team have not had any communications with the U.S. firm.
The figures have not been stellar for the casino corporation, with revenues dropping 87 percent, from $341.1 million to $43.1 million looking at the prior year. Operating cash has shrunk considerably as well from $99.5 million to $27.6 million.
Baker said Great Canadian can operate on a reduced level without Apollo, but he recommends that shareholders accept its offer. Bloombergsen Investment Partners, a Toronto-based investment firm that owns about 14 percent of the company’s equity is in opposition to his stance.
In fact, Bloombergsen is one of Great Canadian’s largest minority shareholders and Great Canadian is one of Bloombersen’s largest holdings in a portfolio worth about US$1.1 billion as of the end of September. According to Sanjay Sen, President and co-founder, this is a terrible and ridiculous deal.
“We will vote against this transaction. The equity value has not been hurt, (it) isn’t burning much cash, we’ve turned the corner (on COVID) … (and) the U.S. regional casinos that are open are earning more money today than they were a year ago.”
Baker has openly recognized that Sen is upset but has assured him that the Apollo deal is in the best interest of shareholders. After all, Great Canadian’s future may not be as strong as in the past. He said that this is not a sell-out on the cheap to some Americans.
“We don’t have to do this deal but it is being brought forward because it’s
the absolute right thing for our shareholders…frankly, you should take this.”
Bloombergsen doesn’t have enough votes to block the deal. In December, it will be decided at the shareholder’s meeting.
They are watching out for minority shareholder groups that sometimes combine forces to push for better terms or block deals.
These groups include Madison Avenue Partners and Breach Inlet Capital investors. They allege that Great Canadian should look for alternatives to the Apollo offer.