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Publicly Traded Vail Resorts May
 Have Potential Buyers

By Jason Blevins, The Denver Post
Knight Ridder/Tribune Business News

July 9, 2004 - Vail Resorts is courting potential buyers interested in acquiring the company, according to more than a dozen sources in the Vail Valley.

The publicly traded ski and resort company has hired a New York investment banking firm to help sell its assets, several sources said.

Vail Resorts declined to comment.

"It's our company policy not to speculate on our stock price or potential transactions," said Vail Resorts spokeswoman Kelly Ladyga.

A buyer calling for all of the company's 35.2 million shares at the current stock price would pay close to $700 million.

Vail Resorts' stock has hovered around $19 -- a two-year high -- for several weeks. The summer months are generally a time when the stock languishes because revenues decline without skiers. The company offered shares at $22 in its initial public offering in February 1997.

Vail Resorts owns Vail, Beaver Creek, Keystone and Breckenridge ski areas in Colorado. It paid $99 million for the Heavenly ski area on the Nevada- California border in 2002. It has grown its lodging wing from a few boutique hotels in the Vail Valley to a collection of more than a dozen luxury hotels across the country. The company also has expanded its real estate wing by developing high-end property in the Vail area.

Leading the rumored list of possible buyers is Mike Shannon, 46, who ran Vail Associates from 1987 to 1992, when George Gillett owned the two-resort ski company. In the last decade, Shannon has grown his California-based KSL Recreation Corp. into a major resort company, with top-tier hotels nationwide.

Earlier this year, Shannon sold all of KSL's equities to a Florida hospitality firm in a $1.4 billion deal.

Shannon was not available for comment.

"Yeah, we've all heard the Shannon rumor," said Gerald Engle, founder of the Cordillera Group, which built one of the Vail Valley's first golf communities. "He's got a bunch of money in his pocket, and he's always said he wanted to come back and buy Vail."

Shannon launched KSL in 1992 with funding from Kohlberg Kravis Roberts & Co., a buyout firm with business ties to Apollo Management LP, the majority stockholder of Vail Resorts.

In March, Apollo sold 1,325,000 shares of Vail stock for $15.30 a share to an unnamed buyer. The company still owns 6.12 million shares of Vail Resorts' class A stock and controls two-thirds of the company's board of directors. The two other largest shareholders are investment manager Ron Baron and Ralcorp Holdings, who combined with Apollo control nearly three-quarters of Vail Resorts' stock value.

Apollo officials did not return a request for comment this week.

Beyond Shannon, other potential buyers are a Wall Street investment firm (not the firm hired by Vail Resorts), a European investment group and an investment team from Dallas, several sources said.

"I heard from a Wall Street firm looking at Vail Resorts," said Avon-based developer Jerry Jones, a former Vail Associates executive. "They were looking at a real estate play, and they needed some information."

Ed Ryberg, winter sports coordinator for the U.S. Forest Service's Rocky Mountain region, said a group of investors from New York contacted him recently. The group was exploring Forest Service policy involving permits for a multiresort company that was restructuring ownership, Ryberg said.

He said the group did not identify which ski company it was looking into.

"They were very vague," Ryberg said.

Dennis Orcutt, the former head of U.S. Bank in Colorado who pioneered ski-area lending in the 1980s and 1990s, said Wall Street and investors would probably value Vail Resorts at $725 million, or six times its earnings. The company had $635 million in debt and $95 million in cash, according to an April 30 financial report.

Orcutt said Wall Street has long struggled to place a value on real estate opportunities within resort companies.

"One of the reasons for that is that once your real estate is sold, your cash flow is gone," Orcutt said. "The question for a new investor at Vail Resorts is, what else they can do with the company? I mean, they've already tried to do just about everything they can. They've bought hotels and jumped into real estate. What's left on the table for a new investor?"

In early June, Vail Resorts CEO Adam Aron announced his company had recently finished its best quarter ever, hinting that its fiscal 2004, which ends July 31, could be its best year for operating income.

The company this summer launched a $500 million renovation of the aging Lionshead and Vail villages, which promise to significantly increase Vail Resorts' real estate revenues in the next five years.

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