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Great Wolf Acquired by Apollo


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Interesting...

http://finance.yahoo.com/news/great-wolf-acquired-affiliate-apollo-110122816.html

An affiliate of Apollo Global Management (APO) and Great Wolf Resorts (WOLF) announced that they have entered into a definitive merger agreement whereby Apollo, a leading global asset manager, will acquire Great Wolf, North America’s largest family of indoor waterpark resorts, for approximately $703M, including the assumption of the Company’s outstanding debt.
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And Cedar Fair had to pay a substantial amount of money to Apollo once the deal was broken off. Not to mention the cost of all the lawyer fees and special meetings that were held. And now look at the price of Cedar Fair units. Apollo wanted to buy for $11.50 a share. At this moment, units are trading at $29.59, just off of the 52 week high.

The complaints issued in that link Interpreter posted are eerily familiar to similar complaints lodged against Apollo when they entered into an agreement with Cedar Fair. Apollo certainly seems to have a rocky relationship with acquiring properties.

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A couple of other interesting notes related to this...

At least 5 other law firms are investigating the deal (according to Google Finance: Bernstein Liebhard LLP, Brower Piven, Kendall Law Group, Glancy Binkow & Goldberg and Weiss & Lurie).

Shares of WOLF are currently trading at $5.22 - up $1.03 (24.58%) from yesterday and just $0.07 shy of the 52-week high.

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Great Wolf Lodges, the largest owner and operator of in-door water park resorts, has recommended to shareholders the sale of the company to private equity firm Apollo Management at just $5.00 per share. WOLF closed at $5.32 per share Tuesday, the day of the announcement, or thirty-two cents above the offer price.

Apollo Management attempted to take Cedar Fair (FUN) private approximately eighteen months ago in a deal priced at $11.50 per Unit. Unitholders fought that acquisition and prevailed in defeating the sale, about a year ago. Tuesday Cedar Fair units closed at $29.82 and enjoys a dividend yield of 5.5%. Unitholders succeeded in replacing the CEO, Board Chair, CFO, various VP's, board members, and forcing the refinancing of debt, the restoration of a dividend--which will substantially increase next year, holding two Special Called Unitholder Meetings, and seeing new management totally redirect promotion/advertising spending to better leverage those costs.

Come what may of the proposed Apollo acquisition of Great Wolf Lodge, those in the Travel and Tourism industry should watch the transaction carefully. This deal may tip the hand and show the cards of the overall health or lack of health of large water park resort operators. Note the failure of WOLF to earn a profit--even on increased revenues and reduced expenses. And this from perhaps the most cost savvy and revenue aware operator in the business.

True the past year has seen tremendous improvements. WOLF has reduced costs, shed under productive and upside down resorts, and increased revenues and occupancy. WOLF has operating partnerships/agreements with Ripley's Entertainment, controls valuable service/trade marks, and owns MagiQuest and Scoooops Kids Spa stand alone concepts/brands.

Over capitalized projects, particularly those with high fixed cost ratios, remain a risk. It is the paradox of the "big box" wherein the business is very profitable at a high occupancy/utilization/revenue level but looses money hand-over-fist with small revenue/occupancy/utilization depletion. it is much the problem shared by airlines--a highly perishable product exhibiting both high fixed costs and low variable costs. Hotels suffer this same perish-ability of product and cost structure, as do amusement parks. Note, Apollo is acquiring and renovating hotels across the country.

How will the proposed acquisition shake-out? Hard to say at this point. But I am evaluating my WOLF holdings. It could get FUN.

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Great Wolf Lodge closed Thursday at $5.44, increasing the gulf between the market value and the Apollo take-private offer price.

Great Wolf has begun sending out tender offers to some shareholders who hold the stock in street name.

Management has been rather quiet and has offered little or no additional information concerning the low-ball Apollo offer.

More law firms are entering the fray.

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All these law firms entering the fray sounds like just a bunch of sharks that sense it is dinner time. All these law firms see is huge legal fees that they stand to collect. Does it really take this many law firms to determine if everyone's financial rights are being protected?

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I doubt it. I'm sure most of them are just trying to get in on the action.

In other news, it seems that investors are less than impressed with this...

http://www.bloomberg.com/news/2012-03-15/apollo-bid-for-great-wolf-resorts-challenged-by-shareholders-1-.html

Great Wolf Resorts Inc. (WOLF), the water- park operator, was sued by investors who said a proposed $703 million sale to private-equity firm Apollo Global Management LLC (APO) undervalues the company.

The deal, which would pay shareholders $5 a share in cash and assume outstanding debt, is inadequate, given that the company’s own financial adviser, Deutsche Bank Securities Inc., valued the company as high as $7.98 a share, David Raul, custodian for Pinchus E. RaulS Utma, said in a complaint filed yesterday in Delaware Chancery Court (1400L).

The proposed transaction “was the result of an unfair and flawed sales process in which Apollo was favored over other interested parties,” Raul said in the complaint.

WOLF apparently learned nothing from the attempted FUN deal...

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WOLF is now trading at $5.47 (just $0.23 shy of its 52-week high of $5.70), as yet another law firm hops on the bandwagon.

Terpy, can you provide any insight as to why so many law firms are investigating this? I'm sure it's mostly for monetary/publicity reasons, but I just can't figure out why so many need to be involved. By my count (looking at the news headlines on Google Finance) there are now 11 law firms investigating this deal.

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Back in the day, soliciting for clients was considered an ethical violation. Nowadays, not so much. In essence, each firm is looking for lead plaintiffs to file suit. If victorious, there are legal fees to be paid, perhaps by the loser.

There is no legal advice contained herein. Consult a competent attorney in your jurisdiction if you have, or think you may have, a legal problem. The writer is not engaged in the private practice of law in this or any other jurisdiction. Views expressed in this post are solely those of the poster.

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Great Wolf Lodges seems to have stumbled into a briar patch.

Tuesday WOLF shares closed at $5.46. Almost a 10% premium above the Apollo offer price. Approximately half the WOLF share float has traded above the offer price since the announcement of the proposed merger.

PWK Partners, a significant WOLF shareholder, has announced "serious concerns" with the proposed acquisition and has sent the Board of Directors a sternly worded letter and asking for an immediate withdraw of the recommendation to merge with Apollo. Tellingly PWK also asks for the Poison Pill to be redeemed. Perhaps signaling an interest in acquiring a larger percentage of the company.

The PWK letter outlines the financial rational for calling off the proposed merger and offers an insightful view of the likely future of WOLF. They laboriously review RevPAR positive trends, strength of the company through the Great Recession, prospective growth areas, significant cost savings-- refinancing of debt would shave off more than $13 million annually by 2015, all the while improving the balance sheet.

Great Wolf Lodge management continues to bury its head in the sand like an ostrich and is failing to respond to shareholders with questions or concerns. This strategy is not wise. Most likely it will lead to a much more antagonistic and activist shareholder base. They could have at least learned that from the Cedar Fair Apollo debacle. A situation they must have plenty of knowledge about considering two of former Cedar Fair CEO Richard Kinzel's kids hold significant positions with Great Wolf.

More law firms are circling, investigating, filing, and preparing to file additional actions. Investors are agitated. Institutional holders are beginning the siren call for board positions.

Neuberger Berman Group LLC, the fifth largest WOLF shareholder, is reported to value Great Wolf at $8.00 to $9.00 per share. Cedar Fair investors will recall Neuberger Berman as a significant holder who agitated and voted against that Apollo merger. It appears NB is peeking its head out once more.

Other observers see a hidden value in the losses which WOLF has incurred in the past. They suggest tax advantages of those losses may be quite significant but are not acknowledged in the pricing of the current Apollo offer.

It is simply unclear what Apollo can bring to the table to improve the company that prudent management practices and initiatives could not also deliver to current shareholders. It appears Apollo wants WOLF, but shareholders do not want Apollo. Apollo is in search of a bargain. That alone should tip-off shareholders to the real value of the company.

The payoff bargain for shareholders may be to retain the company and improve management.

Given WOLF's performance in the recent tough economic times, and its ability to maintain occupancy and Average Daily Revenues per room, well, it seems not to be an opportune time to sell at a fire sale price. Apollo knows the numbers and sees the light of day. Shareholders may be well advised to think as smart as Apollo--and reject this offer.

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You're quite right about Great Wolf management/leadership not caring. The CEO is still saying this is a good deal for shareholders:

http://www.bloomberg.com/news/2012-03-21/great-wolf-chief-calls-703-million-apollo-deal-compelling-1-.html

Kimberly Schaefer, chief executive officer of Great Wolf Resorts Inc. (WOLF), said her company’s proposed sale to Apollo Global Management LLC, which has drawn shareholder opposition, offers investors a “compelling” opportunity.

“Apollo (APO) was the best overall bidder because they had the fully financed and most credible proposal for us,” Schaefer said in a telephone interview yesterday from Madison, Wisconsin, where the water-park operator is based. “That’s how we came down to it. For us, we really looked at the highest bid that we could get for the company and the most likely to close this transaction.”

Interesting that she's saying "best overall bidder". That indicates that there were likely other offers that they aren't telling anyone about.

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