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Heavenly sells for a song



California ski resort the latest loss for ski group

Back in 1997, when the stock market looked unstoppable and the World Trade Centre towers stood over New York, American Skiing Company purchased the Heavenly Ski Resort in South Lake Tahoe and Steamboat Springs in Colorado for $288 million US.

Last week American Skiing Company announced it had sold Heavenly to Vail Resorts, Inc. for just $102 million, including approximately $3 million of assumed debt, and minus a cash adjustment at closing as much as $6 million – a total sale price of between $96 and $99 million. Heavenly is expected to gross between $14.5 and $16 million this year.

The American Skiing Company also heavily invested in the resort in the past five years, and last year installed a $25 million gondola into South Lake Tahoe.

"This transaction will enable Vail Resorts to significantly increase our presence in the North American ski and snowboard resort industry, as well as to geographically diversify our winter revenues," said Adam Aron, the chairman and CEO of Vail Resorts. "Additionally, we are excited to be acquiring Heavenly at what we believe is an attractive price relative to its inherent and potential value."

Heavenly is one of the top 10 most visited ski and snowboard resorts on the continent, and was ranked 15 th in the 2002 SKI magazine reader survey. South Lake Tahoe has about 20,000 beds, and nearly 800 more quarter-share units should be completed this fall.

Vail Resorts plans to invest approximately $25 million in on-mountain improvements above the estimated $3 million a year in annual maintenance capital. They plan to build new on-mountain restaurant facilities, upgrade and replace dated lifts and snowmaking facilities, and enhance the resort’s environmental efforts.

Vail Resorts also owns Vail, Beaver Creek, Breckenridge and Keystone resorts.

The American Skiing Company has been in trouble for years now, and like other publicly traded ski companies, its stocks dropped dramatically after the Sept. 11 terrorist attacks. While Intrawest and Vail Resorts have recovered, American Skiing stocks have continued the slide that started back in 1998.

Poor skiing conditions on the East Coast, where American Skiing owns Killington and Mount Snow in Vermont, and Sunday River and Sugarloaf in Maine, is part of the reason for the slide. Vail Resort and Intrawest are also more diversified than American Skiing, developing the real estate aspects of their resorts.

Perhaps most significantly, American Skiing made many of its resort purchases by borrowing heavily. Investors didn’t like the company’s huge debt load.

American Skiing went public in 1997 at $18 a share, and at press time shares were selling for 23 cents.

In September, American Skiing sold Sugarbush, Vermont, for $7.3 million.

In February, an investment group headed by a Vermont couple, Tim and Diane Mueller, announced plans to purchase Steamboat Springs from American Skiing for approximately $93 million.

Steamboat locals supported the sale to the Muellers’ Triple Peaks company. The town was critical of the American Skiing Company, saying it wasn’t a good partner for the community and didn’t invest in the resort.

But when Vail Resorts this week bought Heavenly, American Skiing pulled the plug on the Steamboat sale.

American Skiing also owns The Canyons resort in Utah.

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