Deals

Gillian Tan is a Bloomberg Gadfly columnist covering deals and private equity. She previously was a reporter for the Wall Street Journal. She is a qualified chartered accountant.

The operator of ski resorts including Vermont's Stratton Mountain, Colorado's Steamboat and Quebec's Mont Tremblant is going private. Again.

Intrawest Resorts Holdings Inc. reached a $1.5 billion deal on Monday to be acquired by a team made up of travel and leisure-focused private equity firm KSL Capital Partners LLC and the company that owns and operates Aspen Snowmass. The offer, at $23.75 a share, has been endorsed by its majority shareholder, Fortress Investment Group LLC, which took Intrawest private in 2006 before taking it public in 2014. It represents a 40 percent premium above the company's closing price on Jan. 12, before reports emerged that it was exploring a sale. That's above the average 32 percent ascribed to consumer discretionary deals over the past decade. 

Fair Price
Fortress, Intrawest's majority shareholder, supports the deal, which is justified in part because the 40 percent premium is relatively generous
Source: Bloomberg

Intrawest shares slumped more than 6.5 percent on Monday, and the outcome should serve as a reminder that shareholders betting on potential takeovers shouldn't get over their skis. The stock has retreated from intraday highs of $25.78 last week on what was unjustified optimism about a takeover offer from a deep-pocketed buyer such as Vail Resorts Inc., which can feasibly afford to pay up for its targets partly because it trades at a sizable premium. 

Powder Play
Intrawest's sale comes after an above-average season of snowfall across its portfolio of resorts
Source: Macquarie Research, OnTheSnow.com

Instead, the deal pegs Denver-based Intrawest's valuation at a slight discount to Vail's similar-sized acquisition of Canada's Whistler Blackcomb Holdings Inc. last summer. It's a decent offer, if only because Intrawest's resorts aren't as esteemed as Whistler Blackcomb, which -- anecdotally -- was separated from Intrawest in a 2010 initial public offering that allowed Fortress to pay down some of the debt created by the original buyout.

By the Numbers
Intrawest's shares pared gains after Monday's deal announcement valued the company at a discount to last summer's takeover of a rival ski resort operator
Source: Bloomberg
*Trailing 12 month multiples **Comparable deals reflect transactions across across the global leisure industry

But the Intrawest buyout isn't the only recent deal in which investors who were betting on heavy takeover premiums have been burned. Just last month, Air Methods Corp. climbed as high as $43.95 in the weeks leading up to an announcement that it had agreed to be acquired by private equity firm American Securities LLC for $43 a share. And in February, DigitalGlobe Inc. jumped to $35.95 but pared gains after its agreement to be acquired by MacDonald Dettwiler & Associates Ltd. in a cash-and-stock deal that valued the company at a fraction below that. As for potential future hiccups, my colleagues Shelly Banjo and Brooke Sutherland have warned Kate Spade & Co. investors that lofty premiums aren't always in the bag, and those shareholders have curtailed their assumptions.

As always, rather than getting swept up in the hopes of heady takeover prices, investors should exercise a little restraint. That'll only make the payoff sweeter, if or when it comes.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Gillian Tan in New York at gtan129@bloomberg.net

To contact the editor responsible for this story:
Daniel Niemi at dniemi1@bloomberg.net