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

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