What Apollo’s Takeover of GCGC May Mean for Casinos

handshake apollo takeover

Lillie Mcguire
Posted on December 07, 2020 at 4:12am

With the definitive acquisition agreement entered into between Canadian casino giant Great Canadian Gaming Corporation and Apollo Global Management now entering its final stages, many have been left speculating about what such a takeover may imply in the long term. The potential impact – either way – cannot be ignored, with many factors and contingencies to be taken into account due to the size and the prominence of the corporation within the context of the Canadian casino games industry and broader economy.

Great Canadian Gaming Corporation confirmed in mid-November that its board of directors had voted unanimously in favour of the acquisition of the casino operator by Apollo Global Management Inc, who will acquire the company by vesting ownership interests in funds managed by the private equity firm.  Apollo Funds, said Great Canadian at the time, would acquire the company at a premium rate of CA$39 per outstanding share – a rate confirmed at the time as equal to a 59% premium, and equating to acquisition value of around CA$3.3 billion. This calculation was as at the time of close of business on November 9, 2020.

Keeping It Local Remains Key

On the positive side of the spectrum is the fact that Great Canadian will remain headquartered in Toronto and led by a Canadian management team. Members of the board, too, will remain predominantly Canadian.

Apollo at the time of the initial announcement furthermore assured members of the board and existing Great Canadian shareholders that owing to its own involvement, the expectation existed that several more private equity firms would show an interest in investing in the casino business following the finalisation of the buy-over. These firms and institutions, said Apollo, would likely be Canadian-owned and locally based.

Apollo Global is renowned for a solid and successful track record in terms of the successful investing in companies subject to highly regulated industries such as the real money casino games sector. This appeared to carry significant weight at the time of the unanimous approval of the take-over by Great Canadian’s board of directors back in November of 2020.

What To Expect Of A Takeover

Apollo has furthermore expressed its commitment to the preservation of the current operational footprint of the casino company – most notably from a local economic (Canadian) point of view. 

Several plans and propositions tabled by Apollo at the time of the initial offer included incentives such as the future expansion of non-gaming venues and amenities, an expanded loyalty (marketing) program, and the improvement of gaming offerings in such a way that those improvements fully leverage the scale of the company’s reach.

Having recognised the firm’s historical involvement in community initiatives and its irreproachable record of corporate citizen, Apollo furthermore committed itself to the uninterrupted continuance of the Great Canadian Gaming Corporation legacy.

Two Opposing Armies

Despite growing opposition from several shareholders, the casino company’s stock soared at the time of the initial announcement – an increase in shareholder value that would ultimately increase even further after the release of the casino games giant’s financial report for Q3 of 2020. 

The main concern raised by shareholders such as Burgundy Asset Management appears to be that of an understating of true value. Said Burgundy in response to the offer, the CA$39 on offer per share is a massive understatement of the real value of the company about to be offloaded.

Dissatisfied with the offer too is Bloombergsen Investment Partners, the Toronto-based investment firm owning a 14% in the business. According to a statement issued by Bloombergsen, the current challenges faced by the business are unlikely to become long-term challenges. As such, said Bloombergsen, the value-per-share should have been calculated based on future expectations instead of the current reality.

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