New Intrawest owner could break up firm
VANCOUVER -- Ski resort operator Intrawest Corp. has agreed to be bought by U.S. private equity firm Fortress Investment Group LLC in a $1.8-billion (U.S.) transaction that could result in the Vancouver company being broken up.
Speculation about which assets may be sold followed New York-based Fortress's agreement to pay $35 a share for Intrawest, whose flagship Whistler ski resort in British Columbia will host key events during the 2010 Winter Olympics.
"They may expand certain parts of their business and dispose of others," said Chris Woronka, an equity analyst with Deutsche Bank Securities Inc. in New York.
"Intrawest could be divided into several pieces," added Joe Coco, a legal adviser to Fortress, which manages $23-billion in equity capital and has investments ranging from German condominiums to aircraft leasing and extended-care homes.
Fortress, which recently acquired $270-million worth of Bank of America loans to pop star Michael Jackson, is buying Intrawest because it sees value in various parts of a business that generated sales of $1.7-billion in fiscal 2005, Mr. Coco said.
Intrawest also owns 10 North American resorts, luxury golf courses and leisure travel businesses.
"Fortress has access to capital that they can add to their businesses," he said.
Yesterday, Intrawest shares rose $7.67 or $28.9 per cent to $34.18 in New York after Fortress agreed to pay a 20-per-cent premium over the closing price on Feb. 27, the day before the company put itself in play.
The shares rose $8.65 (Canadian) to $38.44 on the Toronto Stock Exchange.
The transaction has received the unanimous support not only of the Intrawest board, but also of the company's largest shareholder, New York-based Pirate Capital LLC, which owns 18.2 per cent of Intrawest.
"We think it's a great price," said Stephanie Tran, a spokeswoman for Pirate.
Intrawest chairman and chief executive officer Joe Houssian said the company received expressions of interest from about 100 parties around the world, but decided that the one from Fortress was "in the best interests of shareholders and the company."
Subject to regulatory approval, it will require the backing of 662/3 of the votes cast by Intrawest shareholders at a meeting to be held in mid-October.
Analysts expect the deal to succeed.
"We believe there is a low probability that alternative bids will emerge, given our sense that the nearly six-month long strategic review process likely encapsulated the full gamut of potential buyers," Mr. Woronka said.
The sale is widely seen as part of a privatization trend in the North American real estate sector that is likely to continue as long as interest rates remain low.
Investment industry sources say it is also being fuelled by a disconnect between how companies such as Intrawest are valued by financial analysts -- particularly in Canada -- and U.S. private equity firms.
Mr. Houssian said it is too early to say how much of a role either he or other members of the executive team would play in the future of the company.
However, he said Fortress can continue to build on Intrawest's existing customer base of about eight million visitors while expanding the resort real estate operations in other parts of the world.
"The opportunity to become the go-to, experiential leisure company in the world is very much in front of us and our strategy will be to pursue those initiatives," he said.
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The company: Vancouver-based Intrawest is a world leader in destination resorts and adventure travel. Its resorts in North America include Whistler Blackcomb in B.C., Blue Mountain in Ontario, and Tremblant in Quebec. Non-mountain resort assets include: adventure travel firm Abercrombie & Kent and Sandestin Gold and Beach resort in Florida.
The chairman and CEO: Joe Houssian, 57, is a native of Brandon, Man. The son of Lebanese parents, he founded Intrawest in 1976 after working as a Xerox salesman.
24,800
The number of Intrawest employees.
8 MILLION
Intrawest's customer base.
$1.7-BILLION
The company's annual revenue for the year ended June 30, 2005.
