Vail deal complete
Vail Resorts announced Thursday its purchase of Heavenly Ski Resort was complete, bringing optimism and badly needed capital to the South Shore.
The transaction was worth a net $99.2 million after Vail took a “cash adjustment” of $2.8 million off the $102-million purchase price. The company said the reduction would offset Heavenly’s losses between the close of escrow and July 31, the end of Vail’s fiscal year.
“We believe that the scenery of the Lake Tahoe area is unrivaled. We believe Heavenly is a big, good ski mountain. We believe these are two huge advantages,” said Adam Aron, Vail chairman and chief executive officer.
Aron said his company also was attracted to the proximity of the resort to three major population hubs — San Francisco, Sacramento and Reno — “and everything else in between.”
The location has good access to commercial airports in Reno and Sacramento, both within a two-hour drive. In Colorado, many skiers and boarders spend half a day driving to the resorts.
Heavenly’s former owner, American Skiing Co., declared in March it would sell the South Shore resort instead of its ski area in Steamboat, Colo. The deal provided ASC with $88.5 mllion in cash to reduce its heavy debt load, it said in a statement.
American Skiing lost $223 million in the last reported three quarters, and its stock plummeted to 29 cents before the New York Stock Exchange delisted it.
Vail Resorts, Inc., which owns Vail, Keystone, Beaver Creek and Breckenridge ski areas, plans to shell out $40 million in improvements at Heavenly over the next five years. Areas of improvement include lift and food-service operations as well as employee housing.
Heavenly — which hosted 846,000 skier days last year — operates some housing units, along with 29 chair lifts, a $25-million gondola and seven eateries.
But the resort could be so much more — in winter and summer, Aron said, offering a hint of Vail’s hopes to market other seasons.
“We have creativity and a lot of cash,” he said, adding there’s no illusion about the untapped potential.
“The one thing the mountain needs is a magnificent restaurant looking out at the lake,” he said.
Building a dining establishment and upgrading lift operations make up key components to the plan. But he declined to give specifics about when and where improvements would take place.
The CEO said he also plans to conduct aggressive marketing efforts but would not say yet whether that includes discounted season passes.
“I can tell you that, before the year is over, people will know we’re pro-consumer,” Aron said. He added the company is committed to environmental quality at Lake Tahoe.
“Shame on any of us if we allow the spoiling of that magnificent lake,” Aron said.
He hopes redevelopment includes the move away from “those crummy little motels” to more grand-scale resorts like the Marriott hotel-condominium projects off Park Avenue.
The Heavenly buy is part of a three-year growth strategy. In the last year, Vail has invested $225 million in new acquisitions. One was a $40-million buy of Marriott Mountain Resort.
“We’re very interested in this. We’ve had a great relationship with Vail in the last 15 years,” said Stephen Weisz, president of Marriott Vacation Club. “(It’s) a high-quality operator willing to make investments not only for the company but for the community,” he said while visiting his property Thursday.
Weisz characterized the Heavenly deal as “a good thing that got better.”
“I’m anxious to see their plans,” he said.
So is Heavenly President Dennis Harmon, who manages 1,600 employees during peak season.
“Everybody is so excited. It’s been a long time coming,” Harmon said.
His crew is ready to go into transition, with a Vail team expected to soon visit the South Shore. The team has already started to tackle the computer and accounting system.
Vail Resorts (NYSE: MTN) shares were down 40 cents Thursday to close at $17.85. The Heavenly acquisition was announced after trading closed.
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