Intrawest Agrees to be Acquired by Fortress Investment Group LLC
Intrawest Corporation, the operator and managing developer of Winter Park Resort, has agreed to be acquired by New York-based Fortress Investment Group LLC. The global investment and asset management firm was founded in 1998 with approximately $23 billion in equity capital under management. Headquartered in New York, its affiliates have offices in Dallas, Frankfurt, Geneva, Hong Kong, London, Rome, San Diego, Sydney & Toronto.
Details of the Deal
The agreement was announced on Friday, August 11, 2006, under which funds managed by affiliates of Fortress will acquire all of Intrawest’s outstanding common shares at a price of $35.00 per share. The total value of the transaction, including the existing debt of Intrawest ($992 million), is approximately $2.8 billion. This all-cash transaction represents a 20% premium over Intrawest’s closing price on February 27, 2006, the last trading day before the company announced its intention to review strategic options, and a 32% premium over the closing price prior to the announcement of the offer.
The Board of Directors of Intrawest determined that the transaction with Fortress was the best alternative for the shareholders, and is in the best interests of the company. The transaction must be approved by the applicable court and by 66⅔% of the votes cast by holders of Intrawest shares – anticipated sometime in October 2006. Furthermore, the deal still requires approval from the city of Denver. The city, which owns Winter Park Resort (via its agent Winter Park Recreational Association), has a 50-year deal with Intrawest, and a consent provision in the contract requires approval from the city. Analysts expect the deal to succeed.
“Fortress has a disciplined strategy of acquiring asset-based businesses with high quality platforms, and Intrawest is truly unique in this regard,” said Wesley R. Edens, principal and chairman of the management committee of Fortress Investment Group LLC. “We have a great opportunity to continue Intrawest’s evolution into a leading global leisure player and look forward to working with its management team, employees and partners.”
Ski Area Comment
Our local newspaper, the Winter Park Manifest, carried 3 articles on the story in its August 16 issue, and sought comment from Gary DeFrange, Vice-President and General Manager of Intrawest Winter Park. Predictably, he was fairly non-committal about the implications for the Winter Park ski area, but I found some of his comments interesting:
Example #1: “Right now I’ve been told it’s business as usual…we’re proceeding today the same way we proceeded a week ago.” In an interview, Intrawest Chief Executive Joe Hussian said “It’s business as usual,” but then went on to say, “I would not expect senior executives to be part of the new Fortress enterprise for any extended period of time.”
Example #2: “I have to have confidence with (the decision made by) Intrawest and Goldman…that they selected the right company.” Have to have? Goldman, Sachs & Co., Intrawest’s financial advisor, was brought in back in February, to review options the company had in order to enhance its shareholder value.
Example #3: “I’m excited that we have someone that our folks think will be a good owner.” Admittedly, Gary said he was “the guy in the back seat” this time, as opposed to being central to negotiations.
OK – a fair amount of third party diplomatic press-speak going on here. I’ve already been asked more than once what “the buzz” or “word on the street” is, so here we go.
Local Reaction
You have to remember this is Grand County, where there is more interest in the “Cop Shop” and Help Wanted sections in our local newspapers than the news. Furthermore, there are eight other mountain resorts and one warm-weather destination asking themselves the same question: how will this transaction affect us?
I read comments such as “too soon to speculate with accuracy, but that there will not be as much upheaval as when Intrawest took over,” and “too soon to say.” Also, “most residents and businesses who were asked believed the pending buyout won’t make that much difference.” Doesn’t help much, does it? I guess people just didn’t want to commit to print when they probably hadn’t even heard of Fortress.
In Part II of this three-part post, I’ll be examining what the financial markets thought about this acquisition, and I’ll take a closer look as to what Fortress Investment Company is all about.
