Powdr sells Park City Mountain Resort to Vail Resorts

Powdr sells Park City Mountain Resort to Vail Resorts

By Jason Blevins
The Denver Post
09/11/2014

Powdr Corp. has sold its Park City Mountain Resort to Vail Resorts for $182.5 million, ending a tumultuous year for Utah’s most popular ski destination.

“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 chief executive John Cumming said in a statement. “A sale was the only way to provide long-term certainty for PCMR employees and the Park City community.”

The deal requires Vail Resorts to retain Park City Mountain Resort employees and calms the community’s concerns over the future of the ski area, the largest economic engine in the tourist-dependent valley.

Cumming launched his now seven-resort Powdrempire in Park City in 1994. His flagship resort grew into one of the most popular ski areas in North America.

The sale ends a fiery legal battle that pitted Powdr against its landlord, Talisker Land Holdings. Powdr in April 2011 was a few days late in renewing its long-term lease with Talisker for more than 2,800 acres of upper terrain at Park City Mountain Resort.

That lease, which dated back to the 1970s, had the resort paying roughly $150,000 a year.
Failing to properly file paperwork renewing its 20-year lease will go down in history as the ski industry’s most costly clerical error. Business classes will review this case.

Talisker grabbed the missed deadline as an opportunity to oust Powdr and find a new tenant. It leased its neighboring Canyons ski area to Broomfield-based Vail Resorts in May 2013, offering the continent’s largest resort operator the chance to run Park City Mountain Resort if Vail handled the legal eviction process.

Vail promised Talisker $25 million a year plus a share of revenue for the 4,000-acre Canyons, with an eye toward taking over Park City Mountain Resort and creating the largest single ski area in the country.

Powdr promised a fight. Cumming said if Vail and Talisker prevailed in the eviction, he would rip his chairlifts from the upper terrain and run a smaller resort from the base area land he owned on the border of the mountain and the village of Park City.

A Utah judge in May evicted Powdrfrom two-thirds of Park City Mountain Resort’s skiable terrain, but stayed the order while Vail and Powdr discussed a potential agreement. A compromise seemed distant earlier this year, when Cumming rebuffed Vail’s offer to buy or lease his base area land. Powdr owns Colorado’s Copper Mountain and seven other ski areas in Nevada, California, Oregon and Vermont.

Vail chief Rob Katz said both sides “worked really hard in good faith” to reach the resolution.
“It was a difficult situation and one that needed time to get done,” Katz said.

Vail will include Park City Mountain Resort as part of its wildly popular Epic Pass, which now offers skiing at 22 ski areas.

At the end of April this year, Vail Resorts had $307.4 million in cash on hand. Cumming said the sale “positions Powdr well for future growth.”

“We’re excited to explore new lifestyle and mountain sports opportunities,” said Cumming, whose Powdr acquired the five-facility action sports’ Camp Woodward in 2011 and an award-winning action sports television series sponsored by GoPro in 2013.

Vail valued its May 2013 deal with Talisker for Canyons resort — a 50-year lease — at $306 million. Add $183 million and Vail Resorts picked up more than 7,000 acres of ski terrain in Utah for roughly $489 million.

Vail said Park City Mountain Resort will yield $35 million in earningsbefore interest, depreciation, taxes and amortization, or EBITDA, a measure of cash flow. Canyons is delivering about $25 million in EBITDA for Vail Resorts. A combined EBITDA of $60 million — a conservative estimate analysts expect soon could reach $80 million — means Vail Resorts picked up the two resorts for roughly eight times annual EBITDA. (And it landed Park City Mountain Resort for a little more than five times EBITDA.)

Multiples of earnings are typically used to gauge ski resort transactions and eight times is on the low end for hospitality industry sales. Five times is a fire sale, mirroring Vail Resorts’ 2002 acquisition of the 4,800-acre Heavenly ski area in South Lake Tahoe, Calif., for $99.2 million.

“They got it cheap. This is the best case scenario for Vail,” said analyst Whitney Stevinson, who covers Vail Resorts for JMP Securities. “The real opportunity is combining these two resorts someday and driving even more skiers and revenue.”

Stevinson expected Wall Street traders to embrace the deal. Vail’s stock hit an all-time high of $86 a share before finishing at $85.75, up 11.7 percent.

Vail Resorts’ focus now is connecting Canyons with Park City Mountain Resort, Katz said.

Connection would require a short lift, which needs approval from leaders of Park City and Summit County, Utah. Katz said he hopes to erect the short lift next summer, in time for the 2015-16 ski season.

“If we could put it together, it creates the largest ski mountain in the U.S. Larger than Vail at 7,000 acres,” Katz said, noting how the two mountains “complement” each other.

Canyons has steeps that thrill experts. Park City Mountain Resort has a bounty of heralded intermediate runs. Park City has a huge downtown village. Canyons has a more private, secluded feel with luxury lodges.

“It’s a wide variety. It’s something comparable to what you see in Vail and Beaver Creek, but in this case the resorts are connected,” Katz said.

Vail will operate both resorts separately this winter. The company has yet to strategize future marketing or branding plans that could lead to a name change.

“There is a lot of brand equity in — and strong connection to — the name ‘Park City’ as both the mountain and the very special town,” Vail Resorts spokeswoman Kelly Ladyga said.