Bruce Constantineau
Sun
Intrawest Corp.’s largest shareholder has urged the Vancouver resort developer to sell itself outright to the highest bidder, claiming company shares are worth at least $45 US each — 35 per cent more than the current market price.
“We believe that there are numerous potential bidders who may be willing to acquire Intrawest in a valuation range reflecting a substantial premium to the current market price . . . ,” Pirate Capital LLC representative Stephanie Tran wrote in a letter to the Intrawest board this week. “We urge you to fulfill your fiduciary duties to all shareholders by immediately initiating a sale of the entire company.”
The call for a sale of North America’s largest resort developer comes after Intrawest announced this week it is exploring mergers, partnerships or other “business combinations” to enhance shareholder value and fund future global growth.
Intrawest said an outright sale of the company is just one of several options being considered and a company representative insisted Thursday it won’t be rushed into any decision.
“While we appreciate and listen to the input of all shareholders, the letter from Pirate Capital LLC changes nothing about the broad strategic review that our board has initiated and that we announced earlier this week,” Intrawest spokesman Dan Gagnier said in a prepared statement. “Our board is fully aware of its fiduciary responsibilities and will continue to evaluate all options for creating and delivering value to all of our shareholders.”
Pirate Capital, a hedge fund based in Norwalk, Conn., owns about 12 per cent of Intrawest — paying approximately $135.5 million US for 5,786,900 Intrawest shares over the past 18 months, which works out to $23.41 US a share.
Intrawest shares have increased by more than 14 per cent this week since the company announced its strategic review and based upon Thursday’s closing price of $33.55 US, Pirate Capital already has a paper profit of $58.7 million US.
According to a U.S. regulatory filing Thursday, Pirate Capital bought 364,700 Intrawest shares between Feb. 16 and Feb. 27 this year at prices ranging from $27.54 US a share to $29.10 US a share.
Pirate Capital’s letter to the Intrawest board said the company’s real estate holdings have been undervalued by the public.
“The public market continues to discount the value of your land holdings while you sell them piecemeal at two to three times book value,” the letter states.
Intrawest has interests in 10 North American mountain resorts, including Whistler/Blackcomb, and operates Sandestin golf resort in Florida. It also has joint-venture village development projects in Europe and holds a majority interest in luxury adventure travel company Abercrombie & Kent.
Veritas Investment Research Corp. analyst Anthony Scilipoti said the current share price for Intrawest already represents fair market value for the company’s land holdings.
“Outside of Whistler, the other resorts are of much lower value,” he said in an interview.
Pacific International Securities analyst Sheila Broughton said the $45 US value of Intrawest shares assumed by Pirate Capital appears high, given what analysts currently know about company assets and future plans.
“The events of the past three days have really raised more questions than they have provided answers to,” she said.
© The Vancouver Sun 2006
