Apollo Sways CI to Back Casino Bid After Sweetening Offer by 15%
Tuesday 22nd December 2020
Great Canadian has potential for rapid sales growth, Dean Says
Apollo Global Management Inc.'s increased C$2.5 billion ($1.9 billion) offer for Great Canadian Gaming Corp. was just enough to win over investors, but the casino operator's shareholders may still miss out on a phase of rapid growth, said one money manager whose firm reversed its opposition to the deal.
Great Canadian is good business that has the opportunity to turn into a high-growth firm with world-class assets and a monopoly on gaming in the Greater Toronto area, Greg Dean, a portfolio manager at CI Financial Corp.'s Cambridge Global Asset Management, said in an interview on BNN Bloomberg television.
Apollo's initial offer of C$39 a share didn't compensate investors for that potential, and even the C$45 price wasn't ideal, Dean said. But CI isn't an expert at waging proxy fights and it had to consider the possibility that Apollo would walk away from the deal and how the business would fare in the current environment, he said.
"We think it was the best we could do from where things were kicked off," Dean said of Apollo's 15% increase. "We were worried on the other side of this that there may not be an intact business. So it was important to protect our clients and make sure that we were compensated for the business that exists today, but more importantly the business that we think could be there three, five, 10 years into the future."
After the market closed, Great Canadian said it will close the four Ontario casinos that remained open in response to a provincial government order. Premier Doug Ford's government is locking down non-essential businesses across the province starting Dec. 26.
The higher bid, which was announced Monday and will be voted on Wednesday, has the support of investors holding about 50% of the shares, including CI, BloombergSen Inc. and Burgundy Asset Management Ltd., Apollo said. BloombergSen is a Toronto-based hedge fund and isn't affiliated with Bloomberg LP, the parent company of Bloomberg News.