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Apollo Global Management Ups Bid to $7.85 a Share for Great Wolf Resorts,
 KSL Drops Out and Ends Bidding War

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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