Vail Resorts on Monday said it will spend more than $1 billion to buy Whistler Blackcomb in British Columbia, adding the largest and busiest ski area in North America to its growing international quiver. The deal is one of the ski-resort industry’s largest acquisitions ever.
Vail Resorts — which sells 500,000 season passes a year, more than any other resort operator in the world — now owns half of the 10 busiest ski areas on the continent, including the top three: Whistler Blackcomb, Vail and Breckenridge.
Whistler Blackcomb posted record visitation and revenues last winter and this spring announced a $345 million investment in year-round, weather-independent attractions like an indoor water park, an indoor action sports complex and major on-mountain improvements. Vail Resorts, too, is booming, with record revenues pushing past $1.4 billion and a soaring stock price that climbed more than $9 a share to an all-time high of $155.46 on Monday.
“When two companies are very strong, that’s actually the best time to talk about coming together and building on those strengths,” said Vail Resorts chief Rob Katz, who, in the last decade at the helm of the Broomfield-based company, has overseen the acquisition of California’s Northstar and Kirkwood ski areas, Utah’s Canyons and Park City ski areas, Australia’s Perisher resort and a trio of midwestern ski areas near big cities.
Katz counts Whistler as his top deal, even though he paid a high price.
Vail Resorts is renowned for buying low, usually paying well below the ski industry’s typical resort pricing of eight to nine times a resort’s annual earnings before interest, taxes, depreciation and amortization, or EBITDA. The $1.05 billion price tag for the 8,171-acre Whistler Blackcomb represents more than 11 times the resort’s EBITDA. While that is a high multiple, Vail Resorts’ stock price these days is trading at record levels.
“This is a really incredible resort that has delivered amazing results, and the terms of the transaction really reflect that,” Katz said. “The price of this transaction reflects how much respect we have for what Whistler has accomplished.”
It was not a hard sell to Whistler’s shareholders, resort chief executive Dave Brownlie said. The cash and stock deal triples the 2010 investment of shareholders who picked up Whistler Blackcomb from hedge fund Fortress Investments in an initial public offering. Colorado’s KSL Capital Partners paid $12.75 a share for 24 percent of Whistler in 2012, ending the ownership reign of Intrawest, which once counted Whistler Blackcomb as its flagship.
The deal with Vail Resorts, which requires shareholder approval, values Whistler Blackcomb shares at $27.36, or $36 Canadian. The depth of Vail Resorts — with its industry-dominating Epic Pass, network of loyal, high-dollar ski vacationers and propensity to invest heavily in its resorts — will take Whistler Blackcomb to a higher level, Brownlie said.
Shares in Whistler Blackcomb Holdings gained almost 46 percent to finish at $36.63 Canadian.
“We are obviously proud of what we have done and what we have accomplished, but going forward working with Vail Resorts will make us that much stronger that much faster,” said Brownlie, who will remain the boss at Whistler and join the senior leadership team at Vail Resorts. “And that’s what’s really important to us.”
Analysts heralded the news as Vail added yet another top-tier resort to its Epic Pass program. The high multiple-of-earnings price tag did not seem to bother investors. Vail Resorts is buying with a strong American dollar and a weak Canadian dollar and about half of the deal is financed with stock that is trading at three times what it was in 2012 and 2013.
“This gives them huge long-term growth potential when you think about all the outbound Asia skiers and the Australian market,” said Chris Agnew, an analyst who researches Vail Resorts for MKM Partners. “Their mission is to sell more of these season passes and when you strengthen your network, you make it more compelling. They have a great model and they continue to do it well.”
Brownlie said Whistler is uniquely poised to thrive as climate change and long-term warming trends promise to wreak havoc with the ski industry. The Canadian resort averages about 462 inches of snow every season and for years has developed its high alpine glacial ski terrain, offering a powdery experience even while rain falls on the lower portion of the mountain. The resort’s Peak 2 Peak Gondola connects both mountains and marks the longest span between towers — nearly 2 miles — in the world. The Whistler Blackcomb Renaissance — the largest investment plan in its 50-year history — aims to develop year-round, any-weather amenities that can reduce financial reliance on wintery conditions.
“Then layer on that the network of Vail Resorts — not just for weather but economic and other challenges — and this is going to make Whistler Blackcomb that much stronger and our community stronger for the long term,” Brownlie said.
Whistler Blackcomb reported $262.3 million in revenue from ticket sales, retail and rental, food and beverage and ski school operations in fiscal 2015, up from $254.5 million the previous year. In May the resort company said skier visits for 2015-16 climbed 26 percent to more than 2.2 million, an all-time high. The company showed double-digit revenue growth as well in its second-quarter financial statement this spring, with a 34 percent increase in earnings for the fiscal year through March marking the highest six-month harvest in the company’s history.
Vail Resorts last fall reported $1.4 billion in revenue for fiscal 2015, marking the sixth time in the last decade the company’s annual revenues surpassed the billion-dollar mark. The company showed a 36 percent in EBITDA to $365.8 million in fiscal 2015 and strong sales of its popular Epic Pass in the spring of this year has the company tracking toward another record year for fiscal 2016.
Vail is spending about $150 million more for Whistler than it has spent overall since 2002.
Combining Whistler’s longtime connections with skiers from Asia, Canada and the U.K. with Vail Resorts’ strong ties to deep-pocketed skiers from Latin America, Australia and the U.S. makes Whistler Blackcomb “a perfect fit,” Katz said. Whistler Blackcomb will be part of Vail Resorts’ Epic Pass program for the 2017-18 ski season.
The contentious acquisition of Utah’s Park City and merging it with Vail Resorts’ neighboring Canyons resort to create the largest ski area in the U.S. had a transformative impact on Vail Resorts’ domestic business, Katz said.
“But I think Whistler Blackcomb’s impact on Vail Resorts really is about the whole world,” he said. “There is so much power here that goes well beyond the United States.”
