Vacasa-Casago Merger Gains Momentum: Why ISS and Glass Lewis Back the Deal Despite Lower Price

In a move that underscores the complexities of corporate negotiations, Vacasa, Inc. (NASDAQ: VCSA) stands at a pivotal juncture as it prepares for a shareholder vote on its proposed merger with Casago Holdings, LLC. While the deal’s $5.30-per-share price tag lags behind a competing bid from Davidson Kempner, leading proxy advisory firms ISS and Glass Lewis have thrown their weight behind the Casago transaction. This decision, rooted in risk mitigation and process rigor, highlights a broader theme in today’s volatile market: certainty often outweighs theoretical value.

Proxy Advisors Tip the Scales for Casago

ISS and Glass Lewis have recommended shareholders vote “FOR” the merger, a critical endorsement ahead of the April 29, 2025, shareholder meeting. Their support stems from Vacasa’s eight-month strategic review, which evaluated multiple bids, including Davidson Kempner’s $5.83-per-share proposal. While Davidson’s offer was numerically superior, ISS emphasized the “highest certainty of timing and completion” for Casago’s deal.

The advisors’ reasoning hinges on two pillars:
1. Structural Certainty: Casago’s revised terms removed risky clauses, such as purchase price adjustments tied to liquidity thresholds and antitrust approvals. These changes eliminated potential value erosion or regulatory delays.
2. Tax Receivable Agreement (TRA) Waiver: Casago’s deal uniquely waives payouts to early investors under Vacasa’s TRA, avoiding a financial burden that would have made competing bids costlier to execute. Davidson Kempner’s inability to secure TRA waivers from beneficiaries left its proposal structurally unviable, even at a higher price.

The Davidson Kempner Dilemma: Price vs. Practicality

Davidson Kempner’s $5.83-per-share bid included liquidity support ($20 million) and penalties ($15 million) for non-closure. Yet, its reliance on unresolved TRA waivers and creditor disputes created asymmetric risks. The Vacasa Special Committee, tasked with evaluating bids, deemed Davidson’s proposal a “Superior Proposal” only if these risks were mitigated—a bar Davidson failed to clear.

The Special Committee’s unanimous rejection of Davidson’s offer underscores a recurring theme in corporate takeovers: conditional deals often falter in execution. Even with a 9.6% premium over Casago’s terms, Davidson’s bid carried too much uncertainty to satisfy fiduciary duties.

Financial Context: A Company at a Crossroads

Vacasa’s financial health paints a cautionary backdrop:
- Revenue Decline: An 18.56% year-over-year drop signals operational struggles in the vacation rental sector.
- Analyst Forecasts: A stark divide exists between Wall Street (average target: $2.50, implying a 53.87% downside from current prices) and GuruFocus ($6.25 one-year valuation, 15.31% upside). The brokerage consensus of “Hold” reflects this ambiguity.

The Board’s Calculus: Certainty Over Ambition

Vacasa’s board has reaffirmed its support for the Casago merger, prioritizing closure over nominal value. The TRA waiver alone saves millions in potential payouts, while Casago’s streamlined terms eliminate regulatory hurdles. For shareholders, the choice is clear: accept a lower but certain return or gamble on a higher bid that may never materialize.

Conclusion: A Vote for Stability in an Unstable Market

The April 29 shareholder vote will likely favor the Casago merger, given ISS and Glass Lewis’s backing and the Special Committee’s process. Key data points reinforce this outlook:
- Price vs. Risk: The $5.30 offer is $0.12 below Vacasa’s current stock price ($5.42 as of March 2025), but the certainty of closure may outweigh the small premium.
- Structural Advantages: Casago’s removal of TRA and antitrust conditions reduces execution risks by 20–30% compared to Davidson’s proposal, according to proxy advisors’ analyses.
- Market Dynamics: The vacation rental sector’s consolidation trend, driven by private equity interest (as seen in Davidson’s involvement), further justifies strategic alignment with a stable partner like Casago.

For shareholders, the merger’s approval would stabilize Vacasa’s trajectory amid declining revenues and competitive pressures. A rejection, however, could trigger prolonged uncertainty, potentially driving the stock below even Wall Street’s bearish targets.

In the end, this is a vote for pragmatism over optimism—a lesson markets often learn the hard way.