This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Great Wolf Resorts Gets Private Premium (Update 1)

Stocks in this article: WOLF APO FUN

In 2011, Great Wolf Resorts saw its annual loss narrow by roughly 50% to $25 million on rising sales and overall operating profits. Still, much of Great Wolf Resorts financial stress results from a debt burden that's over $500 million. While the company turned an operating profit in 2011, its near $50 million in annual interest expense has drove overall losses.

In spite of its loss-making ways, Great Wolf Resorts is an attractive target for a private equity buyer, as KSL's bids indicate. Amid a sea of losses, the company also managed to generate roughly $20 million in free cash flow in recent years -- a key for private equity investors. Meanwhile, Great Wolf Resorts owns and licenses many of its 11 resorts, which featuring indoor water parks and family styled suite lodging and restaurants.

Shah of Tullett Prebon notes that Great Wolf Resorts can make a few moves to increase its value above initial offer prices, including selling some land into lease arrangements that can raise cash for the company to spend on developing land. Great Wolf Resorts could also sell a minority stake of roughly 30% of shares to raise its dividend.

For shareholders still yet to tender their shares to a takeover offer, those prospects may be more attractive than present sale prospects. In March, Great Wolf Resorts Chief Executive Kimberly Schaefer told Bloomberg News that after hiring Deutsche Bank to lead a sale, the company reached out to 38 prospective bidders and 11 entered confidentiality agreements to review the company's finances. Nevertheless, in the nine-month sale process, only three bids emerged at a value of roughly $5, according to Bloomberg data, paving the way for the board's approval of Apollo's offer.

Even with management accepting multiple Apollo bids, Tullett Prebon notes that like in the instance of Cedar Fair, large shareholders may oppose a takeover. Neuberger Berman and Scepter Holdings have 5.9% and 3% stakes in Great Wolf Resorts and above 12% stakes in Cedar Fair. In previous media reports, Neuberger Berman has valued Great Wolf Resorts at between $8 to $9 a share.

In a press release, Great Wolf Resorts said that its board of directors will consider KSL's $7 a share bid, "consistent with its fiduciary duties and in consultation with its independent financial and legal advisors." However, when the company's board of directors has unanimously accepted Apollo's $6.75 a share bid, noting its over 100% premium to average share prices in the 90 days prior to first bids.

Still, after accepting Apollo's revised bid, Great Wolf Resorts "terminated its consideration and evaluation" of KSL's bid, in a move that Shah of Tullett Prebon says didn't fully explore how much the real estate and hotels-focused private equity fund was willing to pay. With KSL back at the table with a $7 offer, Great Wolf Resorts' lack of discussion with the firm signals an inadequate bidding process, according to Shah.

Apollo declined to comment for this article. Voicemails and emails left with Great Wolf Resorts were not immediately returned.

For more on deal trends, see 5 deal ready stocks loved by hedge funds portfolio's. See five stocks that could be trampled by a share overhang, for more on private equity backed IPO's.

Deutsche Bank will continue to advise Great Wolf Resorts, while Morgan Stanley, UBS, and Nomura Securities acted as financial advisers to Apollo's March bid.

-- Written by Antoine Gara in New York

2 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs