Apollo’s Bid for Casino Operator Rejected by Major Shareholder

(Bloomberg) -- Apollo Global Management Inc.’s $2.5 billion takeover bid for Great Canadian Gaming Corp. isn’t rich enough for one of the casino operator’s largest shareholders.

Toronto-based Burgundy Asset Management Ltd. plans to hold on to its shares in Great Canadian and won’t vote for the deal, according to a letter seen by Bloomberg.

“We believe Great Canadian’s Ontario assets are irreplaceable properties for which Apollo’s C$39 offer reflects only a fraction of their potential value,” Burgundy portfolio managers David Vanderwood and Andrew Iu said in the letter.

Apollo offered C$39 a share for the Toronto-listed casino operator on Nov. 10, a 35% premium on the stock’s closing price that day of C$28.91. The transaction was unanimously approved by Great Canadian’s board, according to the statement.

However, fund managers at BloombergSen Inc. and CI Financial Corp. -- Great Canadian’s top two shareholders, according to data compiled by Bloomberg -- have panned the offer price. Adding to the backlash now is Burgundy, which is company’s third-largest shareholder with a 9.5% stake, the data show.

BloombergSen is a Toronto-based hedge fund that owns nearly 14% of Great Canadian, according to a recent filing. It isn’t affiliated with Bloomberg LP, the parent company of Bloomberg News.

‘Underwhelming’ Price

Representatives from Apollo defended the bid in a Nov. 11 emailed statement. “Apollo Funds believe the C$39 per share offer delivers significant and immediate value to the shareholders of Great Canadian, despite the material impacts Covid-19 has had on the business for a prolonged period of time,” according to the statement.

Burgundy said that uncertainties related to the Covid-19 pandemic have depressed Great Canadian’s stock price and allowed Apollo to “opportunistically approach the company with an underwhelming, unsolicited bid.”

Apollo’s offer doesn’t value the “tremendous potential” for Great Canadian’s assets in Ontario, Burgundy said in the letter. Even if these assets become financially challenged due to the pandemic, shareholders will benefit from its other businesses in British Columbia and Atlantic Canada, the firm said.

“We believe risk posed by Covid-19 are manageable, and that the British Columbia and Atlantic Canada assets provide a reliable valuation floor” for the stock, Burgundy added. “As a result, we will not vote for this deal.”

Great Canadian rose 0.4% on Nov. 24 to C$37.79 as of 10 a.m. in Toronto.

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