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Whistler Blackcomb IPO draws brokers' warnings

Employees given opportunity to buy shares in new holding company



Whistler Blackcomb is not getting a lot of uptake from public investors.

The company, which has been reconstituted as Whistler Blackcomb Holdings Inc. and is being shopped around to potential investors by banks including CIBC World Markets, BMO Nesbitt Burns and TD Bank Securities, is carrying with it some stern warnings from experts in the financial sector.

One of the latest comes from Will Ashworth, a Toronto-based financial analyst who has worked in the industry for two decades. He warned in an article published on the Investopedia website to "avoid Whistler's big coming out party."

"In the months following the 2010 Winter Olympics in Vancouver, Fortress Investment Group went to work trying to sell Intrawest, the ski resort operator it bought in 2006 for a whopping $2.8 billion," Ashworth wrote. "Its investment has gone downhill faster than Lindsey Vonn did on her gold medal run at Whistler Blackcomb last February.

"Eight months later, with no takers for the company, Fortress has filed a preliminary prospectus that will see it sell off parts of its 75 per cent interest in both mountains to public investors. Hoping to raise $300 million through the IPO, investors are wise to avoid Whistler Blackcomb's big coming out party."

Ashworth goes on to write that Fortress is taking Intrawest's "crown jewel" to the market so that it can relieve the pain of the $1.5 billion debt it assumed when it bought Intrawest.

Whistler Blackcomb is rumoured to have been shopped to Russian billionaire Vladimir Potanin, current part-owner Nippon Cable and Vail Resorts, but Ashworth says not one of them was willing to make an offer for the top ski resort in North America.

"This is a telling sign that Fortress is betting the IPO market is frothy enough to overlook some of the inherent risks of owning a resort that's not growing," he wrote. "Ignorance is truly bliss."

Sources requesting anonymity are reporting similar cautions from their brokers.

One possible investor said that he's asked some questions about the company and hasn't heard any real positive answers. On a personal level, he was advised not to invest in it, but he might still do so if it's possible to buy fewer than the 1,500 Common Shares that the company has set out as a minimum investment. The actual price of shares is expected to be announced early next month but it's expected 1,500 shares would require capital of anywhere between $21,000 and $22,500.

Factors impacting the attractiveness of the product include uncertainty about how much of Fortress's debt will be transferred to Whistler Blackcomb Holdings Inc. There's also the fact that it's a dividend yield and the value of the company isn't expected to grow.

Pat Kelly, owner of the Whistler Real Estate Company and an investor who has shown interest in buying a piece of Whistler Blackcomb, said he hasn't heard anything advising him not to buy in but he said the company was already a "medium-to-high risk" when it announced it was going public.

"Consumer confidence isn't strong right now in general," he said in an interview. "I think that people are reluctant to, they may be reluctant to step up, which means they may not get the price they're looking for. And if they don't, they'll have to make a decision on whether they proceed or not.

"Clearly there's money they want to get out of it. If they can't, I have to assume they've already gone the single private investor route. Private investors have looked at the numbers and said, I don't think so.

"If they go to the public and the public says no, then what?"

Whistler Blackcomb has given its employees an opportunity to purchase shares through a Direct Share Program. The deadline was Oct. 22. They weren't given much detail, but they were told they would have to buy a minimum of 100 shares, priced tentatively at $14 to $15 a share.

The company is going on the market at the same time that the provincial government is holding consultations towards establishing Community Interest Companies (CIC), hybrid companies that are structured to benefit communities and allow limited investor returns within the model of a for-profit company.

West Vancouver-Sea to Sky MLA Joan McIntyre said the intent of CICs isn't to compete with existing non-profits, but to generate profits that can be used for community purposes.

She stressed that CICs have nothing to do with Whistler Blackcomb going public, despite the fact that some Whistler residents have shown an interest in buying into it.

"It's a for-profit company that has money, real estate holdings, makes money from ski operations," McIntyre said. "I think that's completely different, I don't think that's what this is designed for."

The Resort Municipality of Whistler, asked for comment about CICs and Whistler Blackcomb, said it has not had any discussions with the province about establishing any such companies in town and is not working to acquire a piece of Whistler Blackcomb.



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