Ski Resort Deal Flow Continues

Blue Knob ski resort in Claysburg, PA has been acquired by Sustainable Hospitality and Development, a limited partnership formed by a group of six investors from Pittsburgh.  In addition, Grouse Mountain in Vancouver, BC has finally found a buyer — a Chinese investment group called Minsheng Investment.  The $200mm transation will ensure the continued success of the resort.

Saddleback is Back

Saddleback Mountain, the 3rd largest mountain in Maine, was purchased by an Australian company for an undisclosed amount.  Despite their best efforts, a group of local non-profit companies fell short of their fundraising goal and their attempt to keep the ski resort locally owned.  But the mountain will be back, and hopefully for many more years.

 

Intrawest Investors Sue Over $1.5B Aspen SkiCo Deal

Law360 (Dorothy Atkins) reported today that investors hit Intrawest Resort Holdings Inc. and its board with class allegations Friday that shareholders were never given proper information to evaluate the fairness of the luxury adventure company’s $1.5 billion merger deal with Aspen Skiing Co. LLC and KSL Capital Partners.

Filed in Colorado federal court, the proposed class action claims that Intrawest’s May 22 information sheet filed with the U.S. Securities and Exchange Commission contains materially incomplete and misleading information on Intrawest’s financial projections. The sheet also does not explain how Intrawest’s financial advisers Deutsche Bank Securities Inc. and Moelis & Co. LLC valued the adventure company.

“While defendants are touting the fairness of the merger [offer] to the company’s stockholders in the information statement, they have failed to disclose certain material information that is necessary for stockholders to properly assess the fairness of the proposed merger,” the suit says.

On April 7, Intrawest’s board entered into a merger agreement with the newly formed entity Hawk Holding Company Inc., which is controlled by ski resort company Aspen SkiCo and private equity shop KSL. Under the merger, stockholders would receive $23.75 in cash for each share of Intrawest common stock they own.

The next day, on April 8, Fortress Investment Group LLC, which owned 67.9 percent of the Intrawest’s nearly 40 million outstanding shares, approved all respects the proposed merger. As a result, no further action by any stockholders is required to adopt the merger, and the company does not have to solicit any votes from the shareholders, the suit says.

On April 10, Intrawest announced it had entered into an agreement to be acquired by KSL and Aspen SkiCo, which owns and operates four high-end mountain ski areas in Aspen, Colorado.

Friday’s suit says that at the time of the merger agreement, on April 7, Intrawest’s stock was trading at $25.50 per share. But instead of receiving a premium for their shares, as is customary in merger situations, the merger forces investors to sell their shares for a discount, the suit claims. The suit notes that since the announcement, Intrawest’s stock price has fallen “sharply” to $23.60.

“In sum, it appears that the merger consideration fails to adequately compensate Intrawest stockholders, and is the result of a flawed sales process during which company management and the board failed to conduct a sufficient and robust review of strategic alternatives,” the complaint states.

The suit claims that it is “imperative” that Intrawest disclose the material information that has been omitted to stockholders immediately. Stockholders have until June 12 to submit a written demand for appraisal, and if they do not, they will lose all appraisal rights, the suit says.

The merger is expected to close by the end of the third quarter of calendar year, according to Intrawest’s announcement.

Intrawest owns and operates six mountain resorts, including Steamboat Springs and Winter Park. Collectively, the resorts have approximately 8,000 skiable acres and more than 1,100 acres of land for real estate development, according to the company’s site. Intrawest’s income was $156.3 million in its third quarter, according to a May 5 report.

Representatives for Intrawest and counsel for the shareholders did not immediately respond Friday to requests for comment.

The shareholders are represented by Juan E. Monteverde of Monteverde & Associates PC and Nadeem Faruqi and James M. Wilson Jr. of Faruqi & Faruqi LLP.

Counsel information for Intrawest was not immediately available.

The case is Hyden v. Intrawest Resorts Holdings Inc. et al., case number 1:17-cv-01337, in the U.S. District Court for the District of Colorado.

Kohlberg & Vo. Buys K2, Marker, Line, Ride, Volkl and Marmot from Newell

Ski Area Management has reported that Kohlberg & Co., L.L.C. purchased Newell Brands Inc.’s winter sports portfolio which includes K2, Volkl, Marker, Dalbello, Line, Full Tilt, Ride, Madshus, Atlas, Tubbs and BCA, for $240 million.  Kohlberg is a private equity firm specializing in add-on acquisitions, follow-on acquisitions, expansions, turnarounds, corporate carve-out, public-to-private transactions, and equity and debt investments in buyouts of mature and middle market companies. It does not invest in companies operating in the technology and emerging telecommunication sectors. The firm primarily invests in both stable and under performing companies with operational deficiencies. It seeks to invest in companies operating in the traditional manufacturing and services sectors with a focus on consumer product, industrial manufacturing, financial services, healthcare services, commercial services etc.  The portfolio recorded net sales of about $330 million in 2016 and an annual adjusted EBITDA of $25 million.  Kohlberg’s size and resources should should serve these companies well going forward.

Mountain Creek is Latest Resort to Slide in Bankruptcy

Mountain Creek, which operates a ski resort and water and action park, filed for chapter 11 protection today in the Bankruptcy Court for the District of New Jersey.  The petition filed to initiate the case lists $10 million to $50 million in both assets and liabilities.  Much like the Wisp ski resort and Greek Peak resort filings of the past, the company blames the filing on a lack of liquidity based due to a combination of warmer winter temperatures, litigation, and the lingering impact from the residential real estate crisis. The company intends to “gain access to additional capital and liquidity necessary to continue to upgrade the Resort and its facilities, restructure its balance sheet and negotiate the terms of a plan of reorganization.”  The filing lists approximately $2.6 million in trade debt plus $40 million in unsecured loans, and $29 million in secured debt.

Yellowstone Ski Club Founders Hit With Fraudulent Transfer Ruling

A federal jury in Washington ruled that the founder of a private Montana ski and golf resort, Timothy Blixseth, and his wife intentionally defrauded creditors by transferring over $9.3 million of his assets to her control, soon after a $286 million judgment was entered against him.  The liquidating trustee for the Yellowstone Club successfully alleged that Blixseth transferred assets including a private jet and a 156-foot yacht, through a shell company and ultimately to his wife, Jessica.  The jury found that both Timothy and Jessica Blixseth acted with the intent to hinder, defraud or delay creditors, to the tune of $9.3 million.

VAIL RESORTS, INC. TO ACQUIRE WHISTLER BLACKCOMB FOR $1.05 BILLION

Law360 has reported today that Colorado-based Vail Resorts Inc. is acquiring the Canadian Whistler Blackcomb ski resort company for CA$1.39 billion ($1.05 billion) in a stock-and-cash deal.  Vail and Whistler Blackcomb Holdings Inc. agreed to join the two resorts’ portfolios in a strategic business combination under which Vail would acquire 100 percent of Whistler Blackcomb’s stock for $36 per share, at a premium of 4  percent over the closing stock prices and currency exchange rates as of market close on Aug. 5.

BANKRUPT ECHO MOUNTIAN TO BE SOLD FOR $3.8 MILLION

Echo Mountain filed for bankruptcy. Photos by Aaron Kremer.

Echo Mountain is seeking bankruptcy court approval to sell substantially all of its assets in a 363 bankruptcy sale.  The proposed transaction includes 226 acres of real estate and the personal property for the ski operations including snowmaking machines, snow cats and the chairlifts.  The proceeds of the sale will fund distributions to secured and unsecured creditors.

Going Downhill Quickly – Jay Peak Involved a $350 Million Fraud

Law360, New York (May 16, 2016, 4:12 PM ET) — A Vermont Ski resort owner accused by the U.S. Securities and Exchange Commission of a $350 million fraud scheme using the EB-5 immigrant investor program urged a Florida federal court Friday to let him pay attorneys’ fees racked up defending himself, saying the investors’ money is safe.

Jay Peak Resort owner Ariel Quiros is asking the court for an order that would permit him to pay about $280,000 in fees to attorneys and an expert witness, a bid the SEC blasted this month as an “outrageous” request that jeopardizes the ability of defrauded investors to get their money back. But Quiros fired back on Friday, arguing that the SEC is at most looking to disgorge $55 million and that the figure is actually overstated by $30 million. And even though the SEC has undervalued the resort, it admits that it’s worth more than the regulators can recover, Quiros said.

“While the SEC’s so-called ‘economist’ attempted to devalue Jay Peak — ignoring, among other things, an unseasonably warm winter — the resort’s worth is more than sufficient to cover potential disgorgement even of $55 million,” Friday’s reply said. “An order releasing money for fees and costs could not conceivably jeopardize any hypothetical disgorgement.”

Quiros also pushed back against the SEC’s assertion that the fees request is too high, arguing that the case is complex and that the owner is also fighting a suit over similar allegations in Vermont.

“This argument fails to account for the exigencies of a motion for preliminary injunction, the freeze order and the receivership order, the complexities of this litigation, and the parallel litigation in Vermont, which itself requires staffing and preparation,” the reply said. “And yet again, the SEC fails to identify a single specific instance in which partner involvement was inappropriate.”

The SEC sued Quiros and Jay Peak CEO William Stegner last month over an alleged eight-year scheme that raised $350 million from foreign investors. They allegedly told investors that their money funded expansions at the resort as well as a biomedical research facility in Vermont.

The SEC said the two men, through various companies including Jay Peak and Q Resorts Inc., used $200 million of the money in “Ponzi-like fashion” to cover losses in unrelated projects and to pay for $50 million in Quiros’ personal expenses, like buying a luxury condo and paying income taxes. The SEC said the fraud included false statements, deceptive financial transactions and outright theft.

The state of Vermont has also sued Quiros and Stegner over the same alleged fraud scheme. The owner has pushed back against the SEC’s bid for an asset freeze and the appointment of a receiver for the property.

In addition to the fee request from Quiros’ current attorney, former counsel Berger Singerman LLP is also asking the court to allow it to be paid. The firm is seeking $96,930.47 for work it said it performed for the defendant between April 1 and May 5. It said the 177 billable hours was justified becuse of the enormous amount of work it undertook in such a brief amount of time.

“During Berger Singerman’s tenure as Quiros’ counsel, the firm was instantly thrust into an emergency situation of learning a tremendous amount of very complex facts, events and transactions in issue, involving about many thousands of pages of documents and pleadings with exhibits,” the firm said in a motion for payment. “And in fairness to Berger Singerman, we think we excelled in every task, providing the client and lead counsel with quality and efficient legal services.”