By Judy Newman, The Wisconsin State
JournalMcClatchy-Tribune Regional News
April 21, 2012--The bidding war between two private equity
firms is over, and, barring any further surprises, Apollo Global
Management is poised to buy Great Wolf Resorts, of Madison.
Friday night, Great Wolf said KSL Capital Partners dropped out
of the contest. "KSL Capital Partners notified Great Wolf that it does
not intend to submit any further proposals to acquire the Company,"
Great Wolf said, in a news release.
The decision ended an escalating volley of bids between Apollo
and KSL that UW-Madison School of Business associate professor Jim
Seward likened on Friday to a "free-for-all auction."
Shares of the Madison indoor water park resort company jumped
to $8.11 Friday morning before closing at $8.06, after Apollo boosted
its offer to $7.85 a share. Friday's close was 8.6 percent above
Thursday's close of $7.42 a share.
Apollo's latest offer came Thursday night after KSL Capital
Partners bid $7.25 earlier Thursday. That topped Apollo's offer of $7
on Wednesday, matching KSL's previous bid.
Apollo, of New York, and KSL, based in Denver, have been
trying to outdo each other to buy Great Wolf since mid-March, when
Great Wolf's board of directors agreed to sell to Apollo at $5 per
share.
"You're closing in on $8, which really is a 60 percent premium
to the initial bid. That's highly unusual, just on a percentage basis,
to continue to go up that way," said Seward, who also is faculty
director of the UW's Nicholas Center for Corporate Finance and
Investment Banking.
Great Wolf's board of directors said in a news release Friday
morning it voted unanimously to approve Apollo's new offer and was no
longer considering KSL's last proposal.
The board asked that shareholders turn in their stock by May 4
to receive the $7.85 per share, and reiterated that request Friday
night. As of Thursday, about 10 percent of Great Wolf's 33.4 million
shares of common stock had been tendered.
The new arrangement also includes a higher breakup fee of
nearly $10.5 million for Apollo, up from $9.3 million, if Great Wolf
cancels the deal.
Analyst Jeffrey Thomison, vice president of Hilliard Lyons,
headlined a research note Friday, "Apollo raises bid -- more than we
imagined." Thomison said he considered the $7.85 offer to be "on the
generous side.
"Though we generally view Great Wolf's prospects favorably, we
simply do not believe it is worth much higher of a valuation at this
time," Thomison wrote.
But shareholders seemed to disagree, UW's Seward said.
"Whoever bought it at $8.06 thinks we're not done yet," he said.
Leland Wykoff, an individual shareholder in Tennessee, said he
was not surprised the bidding had risen so much.
"All along, I've known the company is worth $8 to $10 (a
share) today," Wykoff said. "Why is it everybody else seems to
understand the value of the company is far greater than management and
the board of directors seem to understand?"
Several large institutional stockholders also opposed earlier
bids, estimating Great Wolf to be worth $8 to $10 a share, though
analysts pegged the value lower, and several shareholder lawsuits were
filed trying to stop the initial deal.
Great Wolf has said, in filings with federal regulators, it
shopped the company for about a year before getting offers of $5 to
$5.05 a share. But more recently, credit markets have opened for this
kind of transaction and the U.S. economic picture has improved, Seward
said.
"There are reports of people spending again, and they're just
tired of being frugal," he said. "I think (Apollo and KSL) think they
can make a go of it."
___
(c)2012 The Wisconsin State Journal (Madison, Wis.)
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