Intrawest Buyout to Close Next Month

By Drew Tanner

In a notice to shareholders, Intrawest announced a special meeting will be held October 17 to approve the takeover by Fortress Investment Group.

Intrawest, based in Vancouver, British Columbia, is the Canadian parent company of Snowshoe Mountain Resort.

The resort is the county's largest employer, with an estimated 450 year-round employees and around 1,500 employees during peak ski season.

The buyout of Intrawest was approved by the Supreme Court of British Columbia on September 19 in an interim order. The transaction must now receive a two-thirds vote from Intrawest shareholders at October's meeting at the Fairmont Waterfront Hotel in Vancouver.

The final court order and closing of the $2.9 billion sale is expected to take place at the end of October.

The all-cash transaction for 100 percent of the company's shares represents a 32 percent premium over the stock price before the proposed sale was announced last month, the Vancouver Sun reported last week.

Intrawest's Board of Directors unanimously recommended that the company's shareholders approve the transaction, said Gordon MacDougall, lead director of Intrawest Corporation.

Intrawest chief executive Joe Houssian stands to make $126 million if the deal is approved, the lion's share of an estimated $159.8 million that would be paid to Intrawest executives.

An information circular released by Intrawest revealed Houssian owns nearly 1.9 million Intrawest shares, worth $66.3 million under the Fortress deal. His share options are worth an estimated $16.7 million while his deferred or restricted share units are worth about $43 million.

Intrawest announced earlier this year it would look for ways to boost the value of its shares after its largest shareholder—Connecticut-based hedge fund Pirate Capital LLC—complained share values were too low.

Pirate Capital owns more than 8.9 million Intrawest shares and supports the Fortress deal. Pirate also stands to make a sizable profit at $73.3 million, according to the Vancouver Sun. The company paid $239.2 million for its ownership position and will receive $312.5 million if shareholders approve the sale.

Intrawest has interests in 10 mountain resorts, including Whistler Blackcomb, which will host the 2010 Winter Olympic and Paralympic Games.

Snowshoe Mountain Resort was purchased by Intrawest in 1995. Since then, Intrawest has invested more than $200 million in the mountaintop resort, which included the construction of more than 500 new condos and homes.

The growing development in and around the resort has led to the current controversy over the size and location of a proposed sewage treatment plant in Slaty Fork.

The resort planned to build its own treatment plant to replace its ailing system around 2002, but that plan was scrapped in favor of a plant that would be built and operated by the Pocahontas County Public Service District.

That plan has drawn criticism and legal challenges over its proposed location on private property and near the headwaters of the Elk River (here and here). With Snowshoe property owners making up more than 90 percent of the project's customer base, opponents have argued the $18 million plant amounts to a public subsidy of the resort.

After news of the sale broke in August, Snowshoe General Manager Bill Rock said the resort was conducting "business as usual," and that little effect of the sale would be felt locally.

As the sale approaches, the resort continues with its fall activities and planning for the winter season.

"Really nothing has changed in terms of our day-to-day operation," said Andrea Smith, Snowshoe Mountain's Communication Manager.

Headquartered in New York, Fortress Investment Group is a global investment and asset management firm founded in 1998 with more than $24 billion in equity capital under management.

John Edwards, the 2004 Democratic candidate for Vice-President, went to work for Fortress as a part-time global deal maker last October.

Earlier this month, the New York Times reported Fortress Investment Group is considering an initial public offering this fall. Such a deal could place the company's value between $5 billion and $7 billion, the New York Times reported.

If it moves forward, the Fortress offering would be the first public listing of its kind. Several business publications have said the offering could pave the way for other seasoned hedge funds and private equity management firms that might be looking for ways to turn their large sums of private money into public asset-management companies.