Vail Resorts buys Park City Mountain Resort
VAIL — Vail Resorts surprised the ski industry Thursday when it announced the purchase of Park City Mountain Resort after more than three years of tense litigation.
Vail’s stock surged after news of the $182.5 million deal broke — MTN was trading at more than $85 per share as of noon, up more than 11 percent from Wednesday’s $76.77 close.
The deal settles litigation between Park City Mountain Resort and Talisker Land Holdings Inc., the landlord for both Canyons and Park City Mountain Resort, which began in 2011 when Park City Mountain Resort’s parent company Powdr Corporation missed a deadline to renew its lease.
When Vail Resorts announced a $305 million, 50-year lease of the Canyons Resort from Talisker in 2013, it also inherited the litigation with Park City Mountain Resort and the potential, pending the outcome of that litigation, to operate both Utah resorts.
At the time, industry analysts speculated that Vail Resorts was confident the outcome would work out in its favor or else the company never would have paid that much for the Canyons deal.
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Vail Resorts CEO Rob Katz has often alluded to grand plans for linking Canyons and Park City Mountain Resort, but he revealed his vision definitively with Thursday’s announcement.
“Our hope is to connect the two (resorts) in the summer of 2015,” he said, noting that the connection would create a 7,000-acre resort, larger than Vail Mountain.
Connectivity plans still have to go through local approvals with both Park City and Summit County (Utah), Katz said.
Relief in Park City
Katz was focused more immediately on the fact that Park City Mountain Resort’s 2,000 employees will keep their jobs this season. Powdr Corporation had announced Tuesday that it was posting a court-ordered $17.5 million bond required to operate the resort this coming season, adding that it would continue to work toward a long-term solution with Talisker and Vail Resorts. That long-term solution came less than 48 hours later.
“Selling was the last thing we wanted to do, and while we believe the law around this issue should be changed, a protracted legal battle is not in line with our core value to be good stewards of the resort communities in which we operate,” Powdr CEO John Cumming said in a statement released Thursday. “A sale was the only way to provide long-term certainty for PCMR employees and the Park City community.”
That certainty was welcomed this week in Park City, said Matt Mullin, a Park City Realtor who grew up in Vail. He said there had been a nagging concern about what would happen at the resort for the 2014-15 season, which had been worrisome for many people within the community.
“Everybody’s pretty relieved that it’s settled,” Mullin said.
Mullin commended Vail Resorts for the way it entered the Park City community after the Canyons deal last year, citing company outreach and overall community support. That said, some community members seem concerned about what it means to now have the company operating two of its resorts.
“I don’t look at it negatively at all, I think it’s positive,” he said. “A lot of people have that fear of corporate takeover, though.”
There’s no doubt about the added value to the Epic Pass, however. Skiers and snowboarders in Colorado and Utah took to social media Thursday expressing excitement about yet another resort being added to the $750 pass. The Epic Pass now includes access to 12 ski resorts in the United States — five in Colorado, two in the Midwest, three around Lake Tahoe and now two in Utah — with limited access to other resorts in Europe and Japan.
The news also brings to fruition at least part of a Ski Utah vision to connect seven Utah resorts over the snow. That initiative, known as One Wasatch, proposes to connect Little and Big Cottonwood canyons, Big Cottonwood Canyon to Park City, Park City to Canyons, and Deer Valley to Park City (which requires just the drop of a rope).
The plan would connect 18,000 acres of terrain and more than 100 lifts, and according to Ski Utah, it could be offered on one lift ticket.
“We support the One Wasatch concept and look forward to working with Ski Utah and the other resorts to make it a reality,” Vail Resorts spokeswoman Kelly Ladyga said.
For now, two resorts on one pass is enough for Colorado’s Epic Pass holders to get excited. Talks of Utah road trips emerged on Facebook, along with criticism of the “evil empire of Vail Resorts,” said one person on Vail Mountain’s page.
Katz doesn’t worry much about those sentiments, though. He pointed out Thursday that Vail Resorts would now offer 12 U.S. ski resorts on its pass — out of roughly 500 total resorts in the country.
“Everybody has choices,” he said, adding that what Vail Resorts brings to the table is a top-notch guest experience through continuous upgrades such as faster lifts and better restaurants.
Any acquisition is all about the overall strategy for Katz, though. While he acknowledges there could be shifts in skier patterns — such as destination guests now traveling to both Utah and Colorado in a season rather than to Colorado multiple times — he looks at it from the perspective of overall market share.
“We don’t have a great share of the Los Angeles market in Colorado,” he said.
While this $182.5 million deal is a relatively high number when compared to past company acquisitions like Heavenly ($96 million), Kirkwood ($18 million) and Northstar ($63 million), Katz said it’s hard to compare those numbers.
“Park City is a very significant resort,” he said, noting skier visitation, destination visitation and a strong brand. “We factor all of that in, and this transaction had many complications.”
Analysts liked the deal Thursday due to higher long-term growth potential associated with connecting the two Utah resorts. JMP Securities increased the stock price target from $85 to $95 and increased fiscal year 2015 earnings estimates to $365 million.
“Including the $305 million capitalized lease liability MTN assumed last year for Canyons and the PCMR ski terrain, MTN has successfully cobbled together the largest contiguous ski area in the country for $488 million, an incredible deal considering the $55 million of EBITDA that we model the two resorts throwing off next year,” wrote JMP Securities analyst Robert A. LaFleur in a midday note to investors.
The deal has clear economic benefits for Vail Resorts, but the benefits for the Park City and Vail communities won’t be known until ski season. Park City Mayor Jack Thomas said he is thrilled about the long-term resolution to the ongoing saga, but he’s not sure this necessarily changes much for business in town.
“Utah’s definitely on the map,” he said. “The 2002 Olympics had a positive impact on who we are. People know Utah skiing now. They know how easy it is to get to and from the airport — you can be in your bindings in 40 minutes.”
That’s a point that business communities near Vail Resorts’ Colorado resorts will pay attention to as time goes on. Vail Valley Partnership President and CEO Chris Romer doesn’t expect an immediate shift, but he thinks Thursday’s news will no doubt change things.
“Why I believe it elevates Park City to be our No. 1 competitor is because of Vail Resorts’ brand-building — they’re so good at it — and the air access is a component of that,” he said.
But everyone rises together, Romer believes. He thinks that more people will buy Epic Passes, including West Coasters, which will benefit every Epic Pass resort.
“I tend to believe that people who are going to try a new resort are going to try a new resort regardless, so it’s great for Vail Resorts to keep people trying new resorts within their portfolio,” he said.
Lauren Glendenning is the editorial projects manager for Colorado Mountain News Media. She can be reached at firstname.lastname@example.org and 970-777-3125.