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Whistler Blackcomb stock issued at $12 per share

Blog by Nick Swinburne | November 4th, 2010

Shares in Whistler Blackcomb Holdings went public this week as the resort’s owners sought to raise $300 million in an initial public offering (IPO) after having slashed the share price twice in the past few days.

The company filed a final prospectus for 25 million common shares at $12 per share, according to a statement issued by the company on Tuesday (Nov. 2). The price is $2 to $3 below that Whistler’s Blackcomb’s owners, Fortress Investment Group, were reported to have been seeking at recently as last week.

Bloomberg News, citing “two people familiar with the sale,” on Tuesday reported the initial dividend yield would be around 8.1 per cent. That’s well above the estimated 6.5 to 7 per cent the owners had reportedly been seeking as late as last week.

The change in the prospective share price and dividend yield in recent days is seen as an indication of weaker-than-expected interest from institutional investors — pension and mutual fund managers, insurance companies and the like — in the share offering.

The initial offering of shares is set to close on Tuesday (Nov. 9), when shares in Whistler Blackcomb Holdings will be listed on the Toronto Stock Exchange under the symbol WB, the company’s statement said.

According to Bloomberg, the sale places the value of Whistler Blackcomb’s assets at $453 million, putting the size of the share offering at 66 per cent of the total.

“Proceeds of the offering will be used to facilitate the acquisition of a 75 per cent interest in the partnerships that own the Whistler Blackcomb resort in British Columbia from Intrawest ULC,” the company statement said.

In an interview last week with Ryan Males, an institutional equity sales agent with CIBC World Markets, one of the banks arranging the sale, Dave Brownlie, WB president and chief financial officer, last week said that after the IPO, Nippon Cable would retain its current 25 per cent stake in the company.

“The remaining 75 per cent will be listed, with Intrawest retaining between 28 and 38 per cent, and Nippon Cable buying around 2 per cent of the issue,” Brownlie was quoted as having said. “You should anticipate Intrawest to reduce its position over time.”

News of the sale follows a flurry of media reports about the company and its IPO over the past week.

On Friday (Oct. 28), the Globe and Mail and others reported that Intrawest owners Fortress had slashed the prospective share price from the $14-to-$15 range to the $12.50-to-$13 range. It also increased the prospective dividend yield from 6.5 to 7 per cent to between 7.5 and 7.8 per cent, the Globe reported.

Both, it said, were an indication of weaker-than-expected interest in the stock.

“For a company with no growth and little diversification, the deal was priced with not enough yield to tempt investors,” the Globe reported.

“Even there, it’s not certain a deal will clear. There is said to be about $100-million of institutional demand, but retail demand is weak, said two sources.”

On Monday (Nov. 1), both the Globe and Bloomberg reported that the price had been slashed again — to $12 a share — and that the dividend yield had risen to 8.12 per cent.

Even at $12 a share, Whistlerite Peter Alder said he wasn’t biting — yet.

The former Whistler Mountain president, who for the past few months has been openly promoting the idea of giving locals a chance to buy a piece of Whistler’s largest employer, on Tuesday said he planned to stay on the sidelines for now.

“I think like many other people, I’m watching,” Alder said. “I’m going to wait. The world doesn’t run away on these things.”

Lukewarm interest from “institutional investors” was likely driving those trying sell shares in the new company to drop their proposed share price and raise proposed dividends, said another Whistlerite who has been closely following the situation.

Pat Kelly, who said he intended to purchase shares in the company, said he believes that since even before the company filed a preliminary prospectus for the IPO on Oct. 8, Fortress officials began approaching the managers of pension funds, mutual funds and insurance companies to pitch the new company’s shares.

“My guess would be that they had to lower the price because the institutional investors weren’t comfortable buying those shares at $14 to $15,” Kelly, president of The Whistler Real Estate Co., said on Thursday. “I can assure you that if the institutional investors thought that $14 to $15 could be supported, that’s what they’d be offered to the public at.

“This is not a low-risk IPO, and I think the institutional investors have told the investment bankers that they’re not comfortable buying in at $14 to $15 a share, and getting that size of a dividend.”

Before the stock market plunged in late 2008, an IPO for such a company would have been a much easier sell, Kelly said. But since then, there has been greater reluctance among investors to put money into companies whose primary source of revenue — in this case ski-lift ticket sales — is perceived as slow-growth and one-dimensional and depends to such a large degree on the weather, he said.

Kelly said that as someone who lives in Whistler, knows how the resort operates and already has a lot here, he has little hesitation in buying WB shares.

But he said it’s not surprising given the current investment climate that the big players are more hesitant.

“My personal experience with eastern financial people is that they tend to be a little more doubtful than those out here. And that’s their prerogative,” Kelly said.

“This (investment climate) is an environment in which there’s a lot of uncertainty in the stock market. People just aren’t going to take the level of risk that they would have three or four years ago.”

Kelly, though, said he was hoping the sale would go ahead.

“It’s a buyer’s market right now,” Kelly said. “The market is saying, ‘I don’t think it’s worth what you’re asking. Here’s what I’m prepared to pay.’

“For me as a local, it’s a lot easier for me to look at the situation and say, ‘I believe in it.’”

David Burke dburke@whistlerquestion.com