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Intrawest sale unlikely to mean changes in Whistler, at least in the short term

Don’t expect any changes at Whistler-Blackcomb, at least not in the immediate future, even though parent company Intrawest is being swallowed by Fortress Investment Group.

"The big part, for Whistler-Blackcomb, is there’s no immediate effect on the resort. It’s business as usual," said Dave Brownlie, chief operating officer for Whistler-Blackcomb.

"It could lead to some exciting possibilities, but meanwhile we’re preparing for winter."

Intrawest announced Aug. 11 that New York-based Fortress Investment Group LLC has agreed to purchase 100 per cent of its stock. The all-cash transaction, worth $2.8 billion US, must be approved by two-thirds of shareholders at a meeting in October.

Fortress’s offer of $35 US per share represents a 20 per cent premium over Intrawest’s closing price on Feb. 27, the last trading day before the company announced its intention to review its strategic options.

The Intrawest board has unanimously recommended that shareholders approve the deal.

Fortress is a global investment and asset management firm with approximately $23 billion in equity capital under management. The company’s holdings include social housing in Germany, government office space in the U.K., commercial aircraft and seniors homes in the U.S.

Sheila Broughton, an analyst with Pacific International Securities in Vancouver, agreed with Brownlie that Whistler would probably see few changes at the resort level following Fortress’s takeover. But some part or parts of Intrawest could be sold.

"Fortress is a company that just spent $2.8 billion to acquire Intrawest," Broughton said. "How it makes a return on that investment will probably be Fortress’s key strategy."

She said it "would be logical" for Fortress to sell some assets to cover the investment, and noted Intrawest has had some of its golf courses for sale for about a year.

"There are opportunities for Fortress, as a private company, to adjust its capital structure," Broughton said.

Part of the impetus for the structural review Intrawest announced in February was that some investors have never understood the company – unsure whether it’s a real estate development firm or in the tourism business. Some, such as Pirate Capital, the largest single shareholder of Intrawest stock with more than 18 per cent, have maintained that the company has been undervalued.

Pirate representatives said they were happy with the price being offered by Fortress.

Intrawest has interests in 10 mountain resorts across North America including Whistler-Blackcomb, Mont Tremblant, Stratton and Copper Mountain. The company also owns Canadian Mountain Holidays, the largest heli-skiing operation in the world, and an interest in Abercrombie & Kent, a world leader in luxury adventure travel. The Intrawest network also includes Sandestin Golf and Beach Resort in Florida and Club Intrawest, a private resort club with nine locations throughout North America.

"It’s more than the assets Fortress is buying," Michael Smith, an analyst with National Bank Financial in Toronto told Bloomberg. "They’re also buying the platform from Intrawest, which is known as a good resort operator."

As Intrawest has diversified in recent years it has acquired businesses that support its resorts, such as the Resort Reservations call centre, and attempted to make use of its database of customers to drive business to other areas, like Abercrombie & Kent.

"If they do decide to separate the operations… how do they keep those benefits? Intrawest has maintained that they need the whole package," said Broughton.

"Whether Fortress says ‘great travel company’ or whether they have other businesses that have a natural fit, we’ll have to see. Fortress may have quite a strategy for the next five, 10 years."

Brownlie said details of Fortress’s long-term plans still have to be worked through and any theories about selling off parts of the company is speculation.

"They acquired Intrawest to grow, not to get smaller," said Brownlie. "They spent time understanding the company, and they will understand us more as we go through this winter."

He added: "Fortress bring financial skill sets to companies and they allow them to grow and to be successful.

"They support the growth of Intrawest and Whistler-Blackcomb."

In a press release Wesley R. Edens, principal and chairman of the management committee of Fortress Investment Group said: "Fortress has a disciplined strategy of acquiring asset-based businesses with high quality platforms and Intrawest is truly unique in this regard.

"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."

More than 100 interested parties from around the world expressed interest in Intrawest following the February announcement of a strategic review. Serious negotiations with about 15 firms took place before Fortress emerged as the most attractive bid.

Broughton called Whistler-Blackcomb unique among Intrawest resorts in that most of the real estate opportunities are already gone. However, she added: "Whistler-Blackcomb will remain a gem in the portfolio."

As to what happens next Broughton reiterated: "I honestly don’t think you’re going to see a lot of changes at the frontline level.

"Whether Fortress decides to move ahead and separate Intrawest into three or four or 10 companies… they won’t be structuring to lose money."