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The Jack Webster Foundation has very kindly nominated Pique’s stories on Whistler Blackcomb going public as a finalist in its Community Reporting category. The winners will be announced at a ceremony on October 24.
You can find some of the nominated stories below:
Whistler Blackcomb to go for $14 to $15 a share, says investor
Sellers looking to sell resort for about $300 million
By Jesse Ferreras
Want a piece of Whistler Blackcomb? Soon you may be able to pick it up for $14 to $15 a share on the Toronto Stock Exchange.
In a preliminary prospectus filed with the TSX on Oct. 8, a group of underwriters including CIBC World Markets, RBC Dominion Securities, BMO Nesbitt Burns, TD Securities Inc. and Goldman Sachs Canada Inc. puts a major stake in Whistler Blackcomb Holdings Inc. up for sale to the public.
The prospectus doesn’t include a proposed share price or what stake in a new company – Whistler Blackcomb Holdings Inc – will be up for sale. However, Pat Kelly, a Whistler investor and head of the Whistler Real Estate Company, said he got a call from his stock broker who told him the price for the initial public offering (IPO) is going to be set at $14 to $15 a share, with a six to seven per cent yield on the dividend.
That means dividends could make investors anywhere from $0.84 to $1.05 for every share they own.
Once the underwriters, led by CIBC World Markets, take Whistler Blackcomb around on a “dog-and-pony show” to various investors, the company will be made available for public investment, according to Kelly.
Asked how he feels about Whistler Blackcomb going public, he said he’s not surprised. He believes the point of the exercise is to help pay down the debts of the parent company, Fortress Investment Group.
“It’s not surprising personally,” he said. “I’m not surprised they would take their primary asset and try to pay their debts down. It would be more interesting if that money was going to be reinvested back into Whistler and the mountains.
“It’s being used to pay down Intrawest and Fortress’s debts, it’s not going to be going back into lift operations or more capital infrastructure.”
In total, 37 million shares are being made available for purchase, according to Kelly, with 21 million going to the public and outside institutions. Intrawest and Nippon Cable, which appears to have increased its stake in Whistler Blackcomb from 23 to 25 per cent, will own the remaining shares of Whistler Blackcomb Holdings.
The new company was registered Oct. 4. Intrawest CEO Bill Jensen is chair of the board of Whistler Blackcomb Holdings. Other board members include Wes Edens, principal of Fortress Investment Group LLC; John Furlong, formerly chief executive officer of the Vancouver Organizing Committee for the 2010 Olympic and Paralympic Winter Games; and Cam Neely, a former hockey player and now president of the Boston Bruins Hockey Club.
The latter two have likely been appointed to the board in order to bring credibility to the board of directors, Kelly said.
“It’s not unusual to put a high profile guy on your board,” he said. “Every board member should bring something to the table, operations expertise, connections with important players. Certainly when Furlong walks into a meeting, he comes with a tremendous amount of credibility, so does Cam Neely.”
The prospectus provides a broad picture of Whistler Blackcomb’s performance as a ski area, something that hasn’t been available to the public since Fortress purchased Intrawest in 2006. Whistler Blackcomb is described as the largest and most visited ski resort in North America, representing about 11 per cent of total skier visits on the continent.
Over the last 10 years it has averaged about 11 per cent market share of skier visits in the Canadian market and an approximately 2.7 per cent market share of visits in the North American market.
Whistler Blackcomb has averaged approximately 2,070,000 skier visits a year since 1997-98, when Whistler and Blackcomb Mountains merged into a single company, excluding the most recent ski season.
In 2007-08 the resort saw approximately 2,190,000 skier visits; in 2008-09 it had approximately 1,878,000 skier visits; and in 2009-2010, the Olympic year, it had 1,667,000 skier visits, owing to Olympic aversion. Without Olympic aversion management believes Whistler Blackcomb would have had 2.15 million skier visits.
Whistler Blackcomb’s revenues varied over the past three years. In 2007 they totalled approximately $218 million; in 2008, $237 million; and in 2009, $219 million. With expenditures taken into account, the company made a profit of $52 million in 2007; $60 million in 2008; and $51 million in 2009.
Lift operations were cited as the single biggest operating segment for the company, having generated about 50 per cent of the company’s revenue in the 2009 fiscal year, and they represent a key revenue generator throughout the year.
Lift ticket revenue from ski operations represents approximately 85 per cent to 91 per cent of the total lift operations revenue, with the remainder generated by summer activities.
Selling points for the company include competitive strengths such as Whistler Blackcomb’s citation as the continent’s “premier mountain resort,” as well as favourable weather and snow conditions, and infrastructure investment such as the Sea to Sky Highway improvement and increased awareness abroad after the 2010 Olympic and Paralympic Winter Games.
Investment analysts have noted that Whistler Blackcomb is not expected to grow significantly – the company doesn’t own substantial real estate holdings – so it would be a conservative investment, relying on steady, continuing operations and a loyal clientele.
Whistler Blackcomb is also said to depend on key employees, and the “unanticipated departure” of any key members of the senior management team could have a “material adverse effect” on Whistler Blackcomb and its prospects.
The filing cites key managers including Intrawest CEO Bill Jensen; Whistler Blackcomb President and Chief Operating Officer Dave Brownlie; Doug Forseth, Whistler Blackcomb’s senior vice-president of operations; and Stuart Rempel, Whistler Blackcomb’s senior vice-president of marketing and sales.
Whistler Blackcomb IPO drawing brokers’ warnings
Employees given opportunity to buy shares in new holding company
By Jesse Ferreras, Pique Newsmagazine
October 28, 2010
Whistler Blackcomb is not getting a lot of uptake from public investors.
The company, which has been reconstituted as Whistler Blackcomb Holdings Inc. and is being shopped around to potential investors by banks including CIBC World Markets, BMO Nesbitt Burns and TD Bank Securities, is carrying with it some stern warnings from experts in the financial sector.
One of the latest comes from Will Ashworth, a Toronto-based financial analyst who has worked in the industry for two decades. He warned in an article published on the Investopedia website to “avoid Whistler’s big coming out party.”
“In the months following the 2010 Winter Olympics in Vancouver, Fortress Investment Group went to work trying to sell Intrawest, the ski resort operator it bought in 2006 for a whopping $2.8 billion,” Ashworth wrote. “Its investment has gone downhill faster than Lindsey Vonn did on her gold medal run at Whistler Blackcomb last February.
“Eight months later, with no takers for the company, Fortress has filed a preliminary prospectus that will see it sell off parts of its 75 per cent interest in both mountains to public investors. Hoping to raise $300 million through the IPO, investors are wise to avoid Whistler Blackcomb’s big coming out party.”
Ashworth goes on to write that Fortress is taking Intrawest’s “crown jewel” to the market so that it can relieve the pain of the $1.5 billion debt it assumed when it bought Intrawest.
Whistler Blackcomb is rumoured to have been shopped to Russian billionaire Vladimir Potanin, current part-owner Nippon Cable and Vail Resorts, but Ashworth says not one of them was willing to make an offer for the top ski resort in North America.
“This is a telling sign that Fortress is betting the IPO market is frothy enough to overlook some of the inherent risks of owning a resort that’s not growing,” he wrote. “Ignorance is truly bliss.”
Sources requesting anonymity are reporting similar cautions from their brokers.
One possible investor said that he’s asked some questions about the company and hasn’t heard any real positive answers. On a personal level, he was advised not to invest in it, but he might still do so if it’s possible to buy fewer than the 1,500 Common Shares that the company has set out as a minimum investment. The actual price of shares is expected to be announced early next month but it’s expected 1,500 shares would require capital of anywhere between $21,000 and $22,500.
Factors impacting the attractiveness of the product include uncertainty about how much of Fortress’s debt will be transferred to Whistler Blackcomb Holdings Inc. There’s also the fact that it’s a dividend yield and the value of the company isn’t expected to grow.
Pat Kelly, owner of the Whistler Real Estate Company and an investor who has shown interest in buying a piece of Whistler Blackcomb, said he hasn’t heard anything advising him not to buy in but he said the company was already a “medium-to-high risk” when it announced it was going public.
“Consumer confidence isn’t strong right now in general,” he said in an interview. “I think that people are reluctant to, they may be reluctant to step up, which means they may not get the price they’re looking for. And if they don’t, they’ll have to make a decision on whether they proceed or not.
“Clearly there’s money they want to get out of it. If they can’t, I have to assume they’ve already gone the single private investor route. Private investors have looked at the numbers and said, I don’t think so.
“If they go to the public and the public says no, then what?”
Whistler Blackcomb has given its employees an opportunity to purchase shares through a Direct Share Program. The deadline was Oct. 22. They weren’t given much detail, but they were told they would have to buy a minimum of 100 shares, priced tentatively at $14 to $15 a share.
The company is going on the market at the same time that the provincial government is holding consultations towards establishing Community Interest Companies (CIC), hybrid companies that are structured to benefit communities and allow limited investor returns within the model of a for-profit company.
West Vancouver-Sea to Sky MLA Joan McIntyre said the intent of CICs isn’t to compete with existing non-profits, but to generate profits that can be used for community purposes.
She stressed that CICs have nothing to do with Whistler Blackcomb going public, despite the fact that some Whistler residents have shown an interest in buying into it.
“It’s a for-profit company that has money, real estate holdings, makes money from ski operations,” McIntyre said. “I think that’s completely different, I don’t think that’s what this is designed for.”
The Resort Municipality of Whistler, asked for comment about CICs and Whistler Blackcomb, said it has not had any discussions with the province about establishing any such companies in town and is not working to acquire a piece of Whistler Blackcomb.
Intrawest reduces stake in Whistler Blackcomb
Company allots shares for underwriters
By Jesse Ferreras, Pique Newsmagazine
November 17, 2010
Intrawest is reduced to the status of quarter-ownership in Whistler Blackcomb after selling $45 million in shares to its underwriters.
The company announced in a news release on Tuesday that banks including CIBC World Markets, RBC Capital Markets and Scotia Capital Inc. have purchased 3,750,000 common shares in Whistler Blackcomb Holdings Inc. at a price of $12 a share.
With the purchase closed, Intrawest is left with about 24 per cent of common shares in the Whistler Blackcomb Holdings, or about 10 per cent less than its stake in Whistler Blackcomb before the underwriters picked up their share.
Public investors and the underwriters now collectively hold 76 per cent of the company, leaving Intrawest as the biggest shareholder but a far cry from majority shareholder in North America’s premier ski resort.
The underwriters were granted an option to buy these shares when they were contracted to help sell the company as it was being put up for sale on the Toronto Stock Exchange. They had 30 days to exercise the option to buy the shares. The proceeds of the sale will go to Intrawest, as Whistler Blackcomb Holdings pointed out in a news release that it would not profit from the over-allotment.
Though it makes clear the stake that Intrawest still holds in the resort, the latest development muddies an already-murky picture of who actually owns Whistler Blackcomb. The 76 per cent that was put up for public sale could be owned by any number of investors.
In Whistler, longtime realtor Pat Kelly has come forward to say he owns shares in the resort but few others have emerged to confirm any ownership of the company. The ownership picture may not become clear until the end of companies’ fourth quarter financial statements, when they have to disclose their holdings to shareholders. That comes at the end of this year.
James Brander, a professor at UBC’s Sauder School of Business, said with the sale of these shares Intrawest ends up owning “significantly less” of Whistler Blackcomb Holdings than was originally planned.
“This does of course reduce the influence of Intrawest in controlling Whistler Blackcomb,” he wrote in an e-mail. “I assume that Intrawest is still by far the largest shareholder but, with only just under one quarter of the stock, Intrawest will have a smaller role on the Board of Directors and could be outvoted.”
Brander went on to say that the underwriters could sell the shares to their clients but could also keep them for a while. Typically, he said, underwriters take advantage of an over-allotment of shares when they expect strong demand for them.
In a week of trading on the Toronto Stock Exchange, Whistler Blackcomb Holdings has fluctuated around its original $12 per share price, reaching a high of $12.50 on its first day of trading and a low of $11.90 the very next day before levelling off just over its initial asking price.