Great Wolf Buyout Game Needs High Roller All-In Bet

Tickers in this article: WOLF FUN APO

NEW YORK ( TheStreet) - The bidding war between private equity firms KSL Capital Partners and Apollo Global Management (APO) for theme park and hotels operator Great Wolf Resorts (WOLF) has been a typical drama about how buyout firms take public companies private. It's also amounted to a terrible poker game.

Great Wolf Resorts shareholders are less focused on a sale process that may be a case study in the conflicts that arise in corporate buyouts, than they are on the lack of high-roller stakes at the bidding table.

Late on Wednesday, Great Wolf Resorts accepted a $7 per share bid by Apollo that matched a previous bid by KSL announced earlier in April. A Thursday morning $7.25 per share bid rebuttal by KSL, a quarter raise in poker parlance, continued a slow rise in Great Wolf's takeover price, fueling shareholder objections in what has been described as a challenged private equity sale process.

Shareholders want Apollo and KSL to raise the stakes in a Great Wolf Resorts showdown.

"It this were a game of Texas Hold-em, they should be raising the blinds," says a Great Wolf Resorts shareholder, who didn't want their name disclosed. In poker, the blind is a mandatory bet made before any cards are dealt, either in addition to or instead of an ante, and forces the stakes for each player to go up as the game progresses.

A sale process that began with a $5 per share bid by Apollo and accepted by Great Wolf Resorts in March has proven dramatic for the emergence of a competing bidder in KSL. While management has sided repeatedly with Apollo bids at $5, $6.75 and most recently $7, KSL has raised the private equity giants bid each time, with Great Wolf Resorts showing little interest in engaging a would-be 'white knight.'

The perceived favoritism is ticking off some investors and analysts. Since KSL hasn't been given access to Great Wolf Resorts finances in the same manner as Apollo, Tullett Prebon special situations strategist Sachin Shah says that the company is missing an opportunity to engage with a credible bidder who may be able to drive the company's sale price significantly higher than current levels and nearly double the initial offer that Great Wolf accepted.

"It's very unusual to see that the company hasn't allowed KSL to do a due diligence. They are basically favoring Apollo and allowing it to increase the termination fee," says Shah, who sees recent bids as still below the fair value of Great Wolf Resorts, which he pegs at between $8 and $8.60 a share. Shah says that "$7.25 is not going to do it; Apollo will either have to come in at 7.50 or walk away."