On Friday last week, less than three months after Fortress Investment Group bought 100 per cent of Intrawest shares and took the company off the stock market, Fortress went public.
Well, sort of. Just 8.6 per cent of Fortress, the parent company of Intrawest, which is the parent company of Whistler-Blackcomb, is now held by the public. But the initial public offering of 34.3 million shares saw the company raise $634 million. Initially offered at $18.50, the shares rose as high as $37 that first day before settling at $31.95.
In its filing, according to the New York Times, the company presented several reasons for going public, including providing capital for acquisitions and increasing employee compensation.
The Fortress IPO made headlines, at least in the U.S., because it is the first hedge fund and private equity company to go public in the United States. Hedge funds — which make up only one part of Fortress — have been known for their secrecy. U.S. Securities and Exchange Commission regulations prohibit hedge funds from engaging in advertising or any kind of general solicitation. They also restrict their investors to people with a net worth of at least $2.5 million and institutions like endowments and pension funds.
Fortress was founded in 1998 by five principal investors as a $1 billion private equity fund. It has grown to a $26 billion company that includes private equity funds, hedge funds and publicly traded vehicles called castles. The five principals control 77.7 per cent of the company, and stand to make a fair bit of profit from the IPO. Nomura Investment Managers U.S.A., a division of a Japanese bank, paid $888 million for a 13.7 per cent stake in Fortress in December. And now, slightly less than 9 per cent of the company is owned by public shareholders.
Does any of this matter to the people of Whistler? After all, from the very beginning “the mountain” has had a variety of owners, many of them based in far away places. In fact, when Franz Wilhelmsen was trying to get Garibaldi Lifts Ltd. off the ground in the early 1960s there were not enough people in the Lower Mainland willing to risk their money in the fledgling company. The whole idea of Whistler would have been dead in the water if Montreal’s Power Corp. hadn’t bought up the balance of the shares at the last minute. With controlling interest in Garibaldi Lifts Ltd., Power Corp. shuffled the company from one subsidiary to another for a number of years, before Vancouver’s Young and Barker families acquired controlling interest.
At Blackcomb, the company that first installed and then ran the lifts on that mountain came into existence as an arm of the Aspen Skiing Company, which at that time was itself a subsidiary of 20th Century Fox. Aspen Skiing Company’s partner in Blackcomb was the Federal Business Development Bank. Intrawest acquired Aspen’s interest in Blackcomb in the mid-80s and in the early ’90s bought out FBDB’s share. Along the way Japan’s Nippon Cable acquired a little more than one-fifth interest in Blackcomb.
In the ’90s, of course, Intrawest decided to concentrate on resort development and acquisitions, which included buying Whistler Mountain Ski Corp. from the Young and Barker families. Nippon Cable’s interest in Blackcomb was transferred to the new, imaginatively-named company, Whistler-Blackcomb.
Locally, Intrawest’s size and reach led to some derogatory references, such as “the Borg” and “the Evil Empire”, but at least the company’s head office was in Vancouver, many of the most senior people were from Whistler and Whistler-Blackcomb was the keystone resort in the company.
However, the stock market always looked at Intrawest through a different lens. It could never figure out exactly what business Intrawest was in. Despite several reorganizations, including getting into tour operations and lowering debt by selling off much of its commercial-retail real estate, the stock market was never satisfied. The most dissatisfied was the aptly-named Pirate Capital LLC, a Connecticut-based hedge fund that was also the largest single holder of Intrawest stock.
Pirate’s thirst for profit led to the events of the last year. Intrawest announced a strategic review of the entire company, which led to Fortress’s purchase of Intrawest for $1.8 billion, which resulted in huge profits for, among others, Pirate Capital.
And now, after taking Intrawest private, Fortress is itself going public, apparently to generate capital for expansion. Whether that means acquisition of more public housing in Germany, more office space in the U.K., more seniors housing in the U.S., or more resorts through Intrawest is not yet known. Replacing the Orange Chair is probably not top of mind.
Which brings us back to an old question: In this complex, multi-layered international world of business and finance, does it matter who owns Whistler-Blackcomb?
It should matter to the people of Whistler. Whistler-Blackcomb is, of course, the largest employer in town and the Crown land the company operates on is the prime reason people come to this town. As large and diverse as the community has become, it would shrivel up if for some reason people weren’t able to ride and slide down Whistler and Blackcomb.
And at a time when the community is engrossed in trying to decide what types of businesses to allow in the village; when the municipality has invested years of effort to acquire more financial tools to better control its own destiny; when there are more people than ever with a stake in what direction the community goes and what it becomes, then it should matter who owns Whistler-Blackcomb.
