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Apollo doubles down on Las Vegas, retail with latest billion-dollar deals

Apollo Global Management spent last year rescuing businesses hit hard by COVID-19 and dealing with an investigation into outgoing CEO Leon Black’s ties to Jeffrey Epstein. Now, the firm is betting on a post-pandemic boom in retail and gambling.

Apollo Global Management will soon own The Venetian Hotel in Las Vegas, despite a spotty track record investing on the Las Vegas strip. (Ethan Miller/Getty Images)

Apollo Global Management spent last year rescuing businesses hit hard by COVID-19 and dealing with the fallout from outgoing CEO Leon Black’s ties to Jeffrey Epstein. Now, the firm has made a pair of bets on companies it feels are primed for post-pandemic booms.

In one deal, Apollo agreed to pay $2.25 billion to acquire the operating company for The Venetian Resort and Sands Expo and Convention Center in Las Vegas from Las Vegas Sands, the resort and casino company formed by late billionaire Sheldon Adelson. In another move, one that had been rumored for days, the firm agreed to acquire Michaels, a retail chain specializing in home crafts sales, in a deal valued at $3.3 billion, or $5 billion including debt.

The Las Vegas economy has been battered by the drop in tourism that accompanied the pandemic. Adelson’s Sands was no exception, posting a nearly $300 million loss in its most recent quarter. But with the US vaccine effort now ramping up and cases dropping dramatically across the country, Apollo is betting that pent-up travel demand could lead to a payday.

“This investment underscores our conviction in a strong recovery for Las Vegas as vaccines usher in a reopening of leisure and travel in the United States and across the world,” Apollo partner Alex van Hoek said in a statement.

Apollo is very familiar with the effects an economic downturn can have on Las Vegas. Famously, it acquired Caesars Entertainment (then known as Harrah’s Entertainment) along with TPG Capital early in 2008, in a $27.8 billion transaction that involved billions in debt. The investment floundered after the onset of the global financial crisis, ending in a contentious court battle with creditors that wasn’t resolved until 2017.

The Venetian deal represents the latest step in a renewed push by Apollo into the gambling sector. The firm agreed last year to acquire Great Canadian Gaming, a casino operator, and it also mounted an unsuccessful bid to purchase William Hill, another gambling behemoth.

Concurrent with Apollo’s investment, publicly traded real estate investor Vici Properties will purchase The Venetian’s land and real estate for an additional $4 billion. It then plans to lease the land back to Apollo.

Michaels, meanwhile, has experienced a surge in sales over the past year, as families following stay-at-home orders have tried to stay busy with crafts and home-improvement projects. In the third quarter of 2020, the company’s sales jumped 15% on a year-over-year basis, to around $1.4 billion. The Texas-based brick-and-mortar chain also launched curbside pickup and same-day delivery offerings in the early days of the pandemic.

But Apollo is also familiar with private equity’s recent struggles in the retail sector. The firm was a backer of Claire’s, a mall retailer of jewelry and other accessories that filed for Chapter 11 bankruptcy protection in 2018, citing faltering sales and around $2 billion in debt.

The price of $22 per share for Michaels marks a 47% premium to the company’s closing price last Friday, the final trading day before sale rumors began to circulate. The company will undergo a 25-day go-shop period in which it could potentially solicit alternative proposals.

Michaels has experience with private equity. In 2006, Blackstone and Bain Capital took the company private in a deal that valued it at more than $6 billion, then took it public in a 2014 offering that valued it at just $3.45 billion.

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    Written by Adam Lewis
    Adam Lewis was a financial writer covering private equity for PitchBook. He covered dealmaking, company and investor news for the PitchBook newsletter and blogs about the intersection of private equity and politics. A graduate of the WSU’s Edward R. Murrow College of Communication, Adam was previously a sportswriter covering the Mariners and Seahawks.
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