Apollo Global Management to Sell Great Wolf Lodge Resorts for Over 1 Billion

[BoddaH1994]

Leon Black’s Apollo Global Management on Tuesday announced it was selling Great Wolf Resorts to Centerbridge Partners.

Terms of the deal were not disclosed but a source close to the situation said it went for $1.35 billion.

Apollo bought the chain in May 2012 for $876 million — putting down just $190 million — so it stands to ring up a profit of $475 million profit, the source said.

http://nypost.com/2015/03/24/apollo-global-to-sell-great-wolf-resorts-for-over-1-billion/

Remember when that one guy from Cedar Fair tried to sell out his own company to Apollo? Ah, the memories... I wonder how he's doing.

[Oldiesmann]

Has Great Wolf actually managed to turn a profit yet? I'm assuming they're doing well if they opened their first new resort in 5 years and are constructing a 2nd one.

[BoddaH1994]

They haven't turned a profit since 2004, I think.

[Outdoor Man]

Leon Black’s Apollo Global Management on Tuesday announced it was selling Great Wolf Resorts to Centerbridge Partners.

Terms of the deal were not disclosed but a source close to the situation said it went for $1.35 billion.

Apollo bought the chain in May 2012 for $876 million — putting down just $190 million — so it stands to ring up a profit of $475 million profit, the source said.

http://nypost.com/2015/03/24/apollo-global-to-sell-great-wolf-resorts-for-over-1-billion/

Remember when that one guy from Cedar Fair tried to sell out his own company to Apollo? Ah, the memories... I wonder how he's doing.

and if I remember the requested terms of the same, he wanted Apollo to retain the CF management team in place at the time. I wonder why they didn't bite on that one...

[The Interpreter]

Who? It was Cedar Fair unitholders who boldly rejected the sale and bitterly dealt Dick Kinzel a life lesson.

[Outdoor Man]

I don't recall who turned their nose up- just remember that the request seemed little off- then again, I probably skimmed the article without reading much detail into it since I wasn't a shareholder myself.

[BoddaH1994]

Geoffrey Reynor is the name you're looking for.

[CoastersRZ]

And I believe that the offer was for $11.50 per unit of Cedar Fair. Cedar Fair has been trading around the mid-upper 50s lately. Seems like the unit holders made a wise decision.

And with Great Wolf being private, they do not disclose their financial performance like a public company, so it is hard to definitively say if they turned a profit.

I will say they are still charging a hefty rate to stay at the one at Kings Island.

[malem]

I will say they are still charging a hefty rate to stay at the one at Kings Island.

Rates are high, but they rely on aggressive discounting to fill up the hotel.

[The Interpreter]

Mr. Raynor personally cost Dick Kinzel at least $20 million.

Money that instead has gone into the parks and to unitholders. Thank goodness for Q, Mr. Knott and Geoff Raynor.

[Leland Wykoff]

The sale of Great Wolf Resorts to Apollo was not without its problems and issues. The proposed original merger did not come close to a fair evaluation and payment to GWR shareholders. The merger consideration was substantially increased, from the paltry $5.00 per share to the final price of $7.85 per share.

As in the proposed merger of Apollo and Cedar Fair management of GWR continued to insist the original offer price of $5.00 per share was fair and fully valued the company--despite the shares surging, and remaining above, the $5 offer price virtually from the moment the proposed deal was announced. In both cases management was quite eager to be acquired at a fire sale price. That may, or may not, have had something to do with the management contracts they were offered under the proposed merger agreements.

Great Wolf Resorts under Apollo Management completed two additional resorts but did not build and design them from the ground up. Those plans were already underway.

In any event the GWR increased merger consideration deal was informed and shaped by many common shareholders at both the individual level and at the institutional levels. Individuals and institutional investors fought hard and waged a campaign to either sink or increase the consideration in the GWR deal. The existence of rather exotic mortgage-type bonds at GWR made that deal easier for institutions to block than the Cedar Fair boondoggle. Failing to gain bond holder approval for the change in control provision the deal could not complete. Institutions holding said bonds did not grant those change in control requests. At least until the deal was sweetened.

The rather rapid turn-out of GWR within two years speaks to the great discount to actual value Apollo was able to achieve even in the face of shareholder activism. But at least the original shareholders managed to capture an additional 30% of the upside value by holding out and refusing to accept the original offer which was so far below market.

The real lesson in these deals is the behavior of entrenched management. One wonders why they stick to defending such stinker deals all the while insisting employment agreements, completion bonuses, and equity in the new company played no bearing upon their recommendation in favor of the merger.

Yes, telling, indeed.

[westcoaster]

To the future success, of a great indoor water park chain.

[The Interpreter]

Where I grew up, an additional $2.85 over $5 is an additional 57 percent, not 30, Mr. W.

[Leland Wykoff]

Where I grew up, an additional $2.85 over $5 is an additional 57 percent, not 30, Mr. W.

Of course The Interpreter is correct on the percentage gain in the original transaction. I intended to refer to the price percentage gain Apollo will take home on this deal after they close with Centerbridge Partners. Reported price to Centerbridge $1.35 billion. Apollo paid $876 million. Thus Apollo stands to gain $475 million.

Had the shareholders not forced a higher payment (57% higher!) than management struck the deal for, that extra fat would have fallen to Apollo. Roughly $499 million additional dollars were returned to the shareholders. Shareholder actions returned more additional funds to the shareholders than Apollo apparently ultimately made on the deal. Shareholders thus gained roughly 2/3 of the full value rather than the roughly less than 1/3 value Apollo/GWR originally proposed.

The real lesson here is why management and boards continue to support deals that return so little to the shareholders. One can also question the need to have sold the company at the time. From the results we see now--and Apollo expected all along--and management must have had an inkling of as well--great wealth and reward was directed to the folks who arrived late at the party.

Remember, it is the shareholders who hosted the party. It is they who should profit.