Vail Resorts has entered into a definitive merger agreement to acquire Peak Resorts for US$11 per share (US$264 million), which is a 115% premium to Friday’s US$5.10 closing price. The deal, which will add 17 U.S. ski areas to Vail’s network, is subject to review and Peak Resorts’ shareholder approval. It is expected to close this fall.
The properties are located in the Northeast and near major metropolitan areas, including New York, Boston, Washington, D.C., Baltimore, Philadelphia, Cleveland, Columbus, St. Louis, Kansas City and Louisville.
More urban “feeder hills” for Vail makes the Epic pass even more attractive, especially in relation to the Ikon pass, said SunTrust Robinson Humphrey analyst Patrick Scholes in his note. “With the exception of Mt. Snow, Vermont, the mountains purchased from Vail Resorts are day-visit resorts that are within two hours of major East Coast cities (NYC, Boston, DC, Baltimore, Philly) and within proximity of several Midwest markets (Cleveland, Columbus, St. Louis, Kansas City, Louisville). Vail has had success with this ‘feeder hill’ strategy with its purchase of small resorts outside of Chicago, Minneapolis, and Detroit and we believe the purchase is a continuation of that strategy.”
Vail Resorts intends to finance the deal through a combination of cash on hand, its existing revolver facility and an expansion of its existing credit facility. In addition, Vail Resorts will be assuming or refinancing Peak Resorts’ outstanding debt.
The acquisition is expected to generate incremental annual EBITDA of approximately $60 million in Vail Resorts’ fiscal year ending July 31, 2021, the first fiscal year with the full benefit of the synergies of the acquisition, with additional revenue upside in future years.
After closing of the transaction, Vail Resorts plans to invest approximately $15 million over the next two years in one-time capital spending to elevate the guest experience at these resorts.