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.