Great Wolf Resorts Gets Private Premium (Update 1)

Updated with Apollo financing, PWK Partners letter and additional information throughout

NEW YORK (TheStreet) -- The bidding war between KSL Capital Partners and Apollo Management(APO) for Great Wolf Resorts(WOLF) , has both private equity firms poised to pay a premium for the struggling water park and hotels chain.

In March, Apollo opened the Great Wolf Resorts sweepstakes with a $5 bid, which was a premium to bargain basement share prices that reflected the company's struggles amid losses and a large debt load. However, in April the emergence of KSL as a bidder has raised the price of Great Wolf Resorts to $7 a share, making what once looked like an opportunistically priced takeover poised to be consummated at a premium priced valuation.

Multiple calculations value the high end of Great Wolf Resorts business and its assets at roughly $8 a share, signaling that if Apollo or KSL were to emerge a clear victor in hunt for Great Wolf Resorts, they would likely have to meet or exceed a premium valuation.

After opening the bidding for Great Wolf Resorts at $5 a share, KSL raised the stakes to $6.25 last week. Over the Easter weekend bankers and bidders hammered out revised bids with Apollo raising its offer to $6.75, which Great Wolf Resorts accepted. However, late on Sunday, KSL threw a second wrench in Apollo's takeover of the Wisconsin-based operator of 11 water park themed resorts with a $7 bid. To be seen is whether Apollo will raise its tender offer, which expires on April 20, or if Great Wolf Resorts will accept KSL's $7 bid, which values the company at $234 million, excluding its debt.