Great Canadian Gaming investor opposes Apollo acquisition

Breach Inlet Capital, a longtime investor of Great Canadian Gaming Corp., says in a letter to GC’s Board of Directors that it will vote against Apollo Global Management’s acquisition offer.

BIC, a private investment firm based in Dallas, argues that Apollo’s offer of $39 per share significantly undervalues the gaming company. BIC also accuses of GC’s Board and senior management of seeking “immediate payouts” from Apollo with no regard for shareholder interests.

In a letter penned 8 Dec, BIC declares that GC has a monopoly over the Greater Toronto Area gaming market and says gross gaming revenue will rise with the completion and expansion of GC casinos as well as the expected legalization of single-game sports betting.

BIC believes GC could be worth around $140 per share by 2022.

“We think it is highly unlikely that COVID or any other factors have materially impacted GC’s long-term earnings power,” the letter says.

BIC says that GC CEO Rod Baker sent the company’s share prices down this summer by deliberately stating its finances were in worse shape than actuality. The letter implies Baker did so to attract a lower offer from Apollo.

“GC’s CEO Rod Baker seemed to intentionally express a dire tone during the 2Q20 earnings call,” the letter says. “In fact, he used the word “challenging” on seven different occasions. In turn, GC’s share price declined and never returned to its August 12^th price until after announcing Apollo’s offer.”

BIC accuses GC of selling “at the bottom” without conducting a proper sales process. The investment firm argues that GC’s Board rushed to take the first offer on the table without contacting its 50/50 Toronto partner, Brookfield Business Partners.

BIC argues that the economic interests of the of the Board and senior management came into play when accepting Apollo’s deal. The investment firm cites long-term cash incentives handed to Baker and President Terrance Doyle.

“… We could understand why GC’s Board and senior management support Apollo’s offer and the prospect of immediate payouts on what were supposed to be long-term incentives,” the letter says. “Unfortunately, their personal gains appear to come at the expense of shareholders’ best interest.”

BIC is just the latest GC investor to publicly oppose the Apollo transaction, joining fund managers BloombergSen Inc. and CI Financial Corp.

Ezra Amacher

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