A couple of weeks ago Intrawest announced it was hiring Goldman, Sachs & Co. and launching a strategic review of its operations. Officially, the company that owns Whistler Blackcomb was looking at all options that may enhance shareholder value and fund future growth, including partnerships, mergers and "other business combinations." Intrawest denied it was selling all or parts of the company.
Meanwhile, the business pages have been reporting the aggressive, some would say predatory, actions of Pirate Capital LLC, a Connecticut-based hedge fund. Pirate Capital, now the largest single shareholder of Intrawest stock, was rumoured to have been preparing a hostile takeover bid at last falls annual general meeting.
Intrawest has long "suffered" because the stock market has never figured out whether its a real estate development company or a tourism operator. If its in the real estate development business, some say, the stock should be worth more, based on the assets the company has. But the operation of ski and golf resorts drags the share price down below what Pirate and some other shareholders think it should be.
According to the Vancouver Sun, Pirate Capital started buying shares of Intrawest about 18 months ago, paying about $135.5 million over that time to acquire nearly 5.8 million shares, an average of about $23.40 US a share. Pirate bought another 150,000 shares last week, at $4.7 million, or approximately $31.40 US per share, and now controls 12.1 per cent of the company.
Pirate believes Intrawest shares should be valued at $45. Stock closed up Monday, after the announcement of the sale of real estate holdings at Mammoth, at $32.46 US a share. If the stock reaches $45 Pirate, based on its current share holdings, would stand to make $125 million US.
Pirate Capital believes there are numerous potential bidders who would pay a substantial premium to gain control of Intrawest. In a March 1 letter to the board of directors Pirates Stephanie Tran wrote: "We urge you to fulfill your fiduciary duties to all shareholders by immediately initiating a sale of the entire company."
So, whether its because of pressure from Pirate, or perhaps just because its time to re-evaluate things, Intrawest is undergoing a structural review. That includes an inventory of all assets and their value, based on the companys plans and, perhaps, based on how the stock market perceives those assets and the company.
This weeks sale of Intrawests majority interest in real estate holdings at Mammoth to Starwood Capital Group doesnt necessarily signal the beginning of the end, as it follows on last years sale of majority interest in Mammoth resort operations to Starwood.