Amendment to General Statement of Beneficial Ownership — Schedule 13D Filing Table of Contents
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1: SC 13D/A Amendment to General Statement of Beneficial HTML 21K
Ownership
2: EX-99.1 Miscellaneous Exhibit HTML 11K
3: EX-99.2 Miscellaneous Exhibit HTML 24K
To
the
Board of Directors of Great Wolf Resorts, Inc.
I
write
as one of the largest holders of your common stock, with 2,375,155 shares
representing approximately 7.78% of the shares outstanding.
You
should not consider the size of our holding as indicating support for current
management or the board of directors.
To
the
contrary, I am writing to express my extreme disappointment in both management
and the board, and to demand, once again, that you devote your attention to
MAXIMIZING SHAREHOLDER VALUE BY SELLING THE COMPANY.
On
August14, 2006, I wrote the board to report a conversation I had with Bruce Neviaser,
then the Chairman of the Board, about the value of your shares. I reported
both Mr. Neviaser's view that the value was at
least
$16 per
share, based on the company's development prospects, as well as my own view
that
the share price was significantly discounted by the market. I stated
unequivocally, and in the same block capital letters, that shareholder value
would be maximized by a sale of the company. I encouraged the board to
take immediate steps to unlock long-term shareholder value by retaining an
investment banking firm to explore the sale of the company. I requested a
meeting with the board to discuss my views regarding valuation.
The
closing price of the shares on the day I wrote the letter was $10.75. On
the very next day, I filed a 13-D disclosing my letter to the board. The
share price rose to $11.77. The following day, August 16th, you announced
that the company was not for sale, and the shares closed down, at
$11.68.
On
September 12, 2006, you announced Mr. Neviaser's resignation as your
Chairman. The following day, I traveled to your offices in the Virginia
suburbs of Washington, DC and met with John Emery, your CEO, and Elan Blutinger,
an independent director. I brought with me several bankers from UBS with
experience in your industry. I reiterated my strong recommendation that
you engage an investment banking firm to explore the sale of the company,
especially with a view toward private equity alternatives, to unlock the
apparent discount then applied by the market to your development pipeline.
Mr. Emery and Mr. Blutinger met alone with the bankers for a time. Mr.
Emery's response was polite, but firm; he stated that your operations and the
value of your pipeline would significantly boost the stock price, and that
a
sale would be unnecessary. I replied that I did not see that
happening. That day, the share price closed at $12.32.
On
October 24, 2006, you announced that you had broken ground on your 10th
resort. The shares closed at $12.75.
On
November 6, 2006, you reported third-quarter earnings. Net of a one-time
bump from condo sales in the prior year, your third-quarter results showed
improvement in revenue and occupancy, including on a same-store basis. The
shares closed at $13.56.
On
November 21, 2006, you announced the appointment of Joseph Vittoria as
Chairman. The share price fell for the day, but closed at $13.01.
On
February 27, 2007, your shares closed at $13.62. Yesterday, you announced
your fourth-quarter results, reaching the top end of your revised EBITDA
guidance, made on February 9. Despite this, today your shares closed
down 316bps
from
Tuesday’s close, at $13.19.
The
ideas
I expressed last August raised the share price $1.02 (9.5%) in
one
day. Your
performance over the intervening six-and-a-half months raised the price an
additional $1.42 (12.1%). You are still $2.81 away from the $16 target
price that your own Chairman said was reasonable. Perhaps even more
alarming is the fact that your shares continue to be among the least traded
in
the lodging subset, averaging daily trading value of less than $2 million.
Public investors have turned their attention elsewhere.
All
this
has happened while there has been a boom in deals in the lodging space, fueled
by tremendous private equity interest and investment. The space you once
dominated, indoor water parks, has seen the entrance of other, better
capitalized and savvy developers. You just took large, non-deductible
write-offs for goodwill impairment at two of your major resorts, development
and
construction costs are increasing (together with competition), and your
prospects as a stand-alone aren't materially brighter today than they were
last
August. You have pretty much done what you said you would do in terms of
development, but the market continues either to ignore or undervalue
you. Negative Analyst sentiment is no longer an issue, with three of the
four fundamental analyst covering your stock rating it as a buy according to
Bloomberg. Their average price target of $16.50 reconciles with our
views.
I
continue to believe there is intrinsic value in the business, but I don't have
confidence that current management or the current board can - on their own
-
unlock this value for shareholders. I find it irresponsible that Mr. Emery
simply refused to return any follow-up calls from the UBS bankers - and has
not
begun any alternative sale process. Now is not the time to continue to wait
for
performance to bail you out. As I said last August, it's not
happening.
Performance
Since 12/14/2004 - WOLF IPO Date
HOT
HLT
CHH
FS
SIX
MAR
HST
WOLF
43.4%
57.8%
37.8%
10.0%
24.6%
52.5%
59.3%
(22.7%)
Wolf
vs. Hilton
(80.5%)
Wolf
vs. Marriott
(75.2%)
Wolf
vs. Starwood
(66.1%)
Performance
Since 12/14/2004 - WOLF IPO Date
Lodging
Comp
NASDAQ
S&P
500
WOLF
48.3%
11.4%
16.1%
(22.7%)
Wolf
vs. Lodging Comp
(71.0%)
Wolf
vs. NASDAQ
(34.1%)
Wolf
vs. S&P 500
(38.8%)
Mr.
Neviaser, still a 5.5% shareholder, understood this, and he was apparently
forced off the board. I believe that other large shareholders share this
sentiment, but you can gauge it for yourselves. I also believe there would
be significant interest within the private equity community - or among the
strategic players - in a transaction involving WOLF. You don't know
because you refuse to explore it. That is irresponsible and can no longer
be tolerated. I eagerly await the announcement of your engagement of an
investment bank to advise you regarding strategic alternatives. Clearly,
you cannot do it on your own.
Jason
Ader
Dates Referenced Herein and Documents Incorporated by Reference
