The Intrawest takeover of Copper Mountain was an important factor in the U.S. Justice Department’s decision last Friday to approve the merger of Vail Resorts and Ralcorp Holdings, creating the largest ski resort company in North America. The ruling, by the Justice Department and the Colorado Attorney General, allows Ralcorp’s Breckenridge and Keystone ski areas to join Vail and Beaver Creek under the Vail Resorts corporate umbrella but requires the company to sell Arapahoe Basin. Many industry people had expected the Justice Department to require divestiture of either Keystone or Breckenridge, each of which had more than a million skier visits last season. Arapahoe Basin, the smallest of the three Ralcorp holdings, had just over 250,000 skier visits last winter. The deal between Ralcorp and Vail Resorts, announced last summer, was to have expired at midnight, Dec. 31, but a 10-day extension was granted. According to a report in SkiNet, the deal was stalled partly because of the sheer volume of background material that needed to be reviewed by the Justice Department and the Colorado Attorney General's office, but there were also rumours of an internal dispute within the Justice Department about initiating legal action against the merger, because Vail Resorts would control the lion's share of Colorado Front Range skiers. SkiNet reported, "The situation changed, however, when Intrawest announced its merger with Copper Mountain and Whistler, thus guaranteeing competition between heavyweights with big-buck backings." While not quoting anyone, SkiNet reported that some people in the ski industry were questioning whether the divestiture of Arapahoe Basin was a political solution or simply tokenism. Deputy Assistant Attorney General Larry Fullerton of the Justice Department told SkiNet the parties involved picked Arapahoe Basin. "We conducted the investigation and decided that it (the merger) threatened consumers on the Front Range. ...(In such a case) We tell the parties involved and a process of negotiation ensues in which they offer relief that they think may solve the problem and we react to it." The deal brings the three largest ski mountains in North America — all of them in Colorado’s Front Range — under one company; Vail had 1.65 million skier visits last winter, Breckenridge 1.35 million and Keystone just over 1 million. Excluding Arapahoe Basin, the merger creates a company that had 4.6 million skier visits last winter and revenues of approximately $320 million. Intrawest, including Whistler, Copper and one-third of Mammoth’s totals, had about 4.5 million skier visits last winter. The American Skiing Company, which owns eight eastern ski areas, had 3.5 million skier visits last winter. The French Compagnie des Alpes is the largest ski resort operator in the world. Compagnie des Alpes operates La Plagne, Tignes, Les Arcs, Les Menuires, Les Grands Montets, and has minority shares in Val Thorens and Meribel — a combined 9.6 million skier visits last winter and total revenues of US$168 million. Vail Resorts is now moving ahead with its earlier plans for a $150 million public stock offering. Vail Resorts announced last summer that it intends to spend $20 million annually marketing its ski areas. The Whistler Resort Association has an annual marketing budget of about CDN$4.2 million. Adam Aron, chairman of the board and chief executive officer of Vail Resorts, said in a press release, "Vail Resorts will now encompass several of the nation’s finest destination resorts — each with unique personalities, the distinct character of which we intend to preserve." Joe Micheletto, president and chief executive officer of Ralcorp said, "the merger is the result of a transformation of the ski industry where consumers are demanding more snowmaking, faster lifts and more services. Consolidation is a logical step for the ski industry, as it creates economies of scale and provides access to the funding needed to compete in this capital intensive business." The merger makes Vail Resorts one of Colorado's largest employers, Andy Daly, president of Vail Resorts, said. "Natural mountain conditions and a network of state-of-the-art chairlifts is but part of what is needed to succeed in today’s competitive ski business. Personalized service has become a critical differentiator between resorts." Under the terms of the agreement, Vail Resorts will assume approximately $165 million of Ralcorp's current indebtedness and Ralcorp will receive approximately 25 per cent of the common stock of the combined company. Arapahoe will be run as an independent operation, pending its sale, Aron said. Over the next several weeks, Vail Resorts will be making announcements about the interchangeability of lift tickets and discount entitlements for various ski cards.
