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New directions for Intrawest?

A week after strategic announcement, analysts offer context

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Within hours of a press release being issued by Intrawest last week saying it was undertaking a strategic review the Whistler rumour-mill went into overdrive.

There were reports that the company was up for sale, that Whistler Blackcomb might be sold off, that investors were calling for change.

By last Thursday Standard and Poor placed the credit rating of the Vancouver resort operator and real estate developer on "credit watch." It said its action reflected the potential for Intrawest’s rating to be negatively affected if the company adopted a more aggressive capital structure no longer suitable for its current "BB" rating.

A week later the news of the review is being considered in a more strategic light with some arguing last week’s furor was a storm in a teacup driven in part by profit-seeking activist shareholders.

The Feb. 28 press release said Intrawest was initiating a review of strategic options available to the company for enhancing shareholder value, including, but not limited to a capital structure review, strategic partnerships or business combinations. The company said it had retained Goldman, Sachs & Co to assist in the review.

In fact Goldman Sachs has been involved with Intrawest since about September said Sheila Broughton, an equity analyst with Pacific International Securities Inc.

"(Intrawest) formalized its arrangement with Goldman Sachs in that press release," she said.

"Goldman Sachs is not just arriving at Intrawest now."

With news of the review came press coverage of a call by Pirate Capital LLC, a Norwalk, Conn. money manager that owns 12 per cent of Intrawest, to sell the company.

This served to fuel the rumour that the company was in play.

Intrawest chief executive Joe Houssian told any media outlet who called him last week that the "objective isn’t to sell off our assets."

That claim was supported by Whistler Blackcomb’s executive vice-president and chief operating Dave Brownlie in last week’s Pique Newsmagazine.

It is not unusual for management teams to look at engaging an investment banker to review their strategic options, said Gail Mifsud of Raymond James.

"From my point of view I believe that (Intrawest) management has been pro-active and has done a lot of the required things that needed to be done to result in increased share price," she said.

"Quite frankly, I think discussions about the potential sale of the company in terms of surfacing additional value are overblown. The reality is that you have a unique collection of real assets at the base of the mountains and you have ski and resort operations and at this point in time you have a real estate side of the business that ends up requiring a lot of capital."

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