Lawsuit challenges Aspen Skiing Co, KSL purchase of Intrawest
June 7, 2017
One of Aspen Skiing Co.'s blockbuster ski-industry merger proposals is facing a legal challenge.
A stockholder in Intrawest Resort Holdings Inc., a publicly traded company, filed a lawsuit Friday challenging the legality of the acquisition of Intrawest by affiliates of Aspen Skiing Co. and KSL Capital Partners.
Stockholder Edward Hayden claimed Intrawest's top executives and board of directors "failed to conduct a sufficient and robust review of strategic alternatives."
In addition, they authorized a "materially incomplete and misleading" information statement that explained to shareholders why the merger proposal was accepted.
“That means instead of stockholders receiving a premium for their shares, as is customary in merger situations, Intrawest stockholders would actually be offering their shares at a discount.”
— allegation made in lawsuit
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"In particular, the information statement contains materially incomplete information concerning (i) financial projections for the company; and (ii) the valuation analysis performed by the company's financial advisers, Deutsche Bank Securities Inc. and Moelis & Co., in support of their fairness opinions," the lawsuit said.
The affiliates of Skico and KSL offered $23.75 in cash for each share of Intrawest common stock in a deal announced April 10. The deal represents a total valuation of $1.5 billion, including debt obligations.
"The merger consideration appears inadequate in light of the company's recent financial performance," the lawsuit said.
A majority shareholder approved the deal. No vote is necessary from other shareholders.
The price was set after negotiations and after an initial offer by Skico and KSL was rejected, according to the information sheet, which is required to be filed by the U.S. Securities and Exchange Commission.
The lawsuit noted that immediately prior to the merger, Intrawest's stock was trading at $25.50 per share yet the deal was for $23.75 per share.
"That means instead of stockholders receiving a premium for their shares, as is customary in merger situations, Intrawest stockholders would actually be offering their shares at a discount," the lawsuit said.
Once the information sheet was filed by Intrawest, stockholders had 20 days to submit a written demand for an appraisal of the company. The deadline is Monday.
The acquisition is coveted by Skico because Intrawest's holdings include Steamboat and Winter Park.
"Therefore, it is imperative that the material information that has been omitted from the information sheet is disclosed to the company's stockholders immediately, so they can properly exercise their corporate suffrage rights," the lawsuit said.
Hayden is asking a judge to enjoin Intrawest and the other parties from consummating the proposed merger before Monday.
Aspen Skiing Co. and KSL Capital Partners aren't named in the lawsuit. Skico spokesman Jeff Hanle said the company had no comment on a lawsuit that doesn't directly affect it. A phone message and email sent to Intrawest's investor relations office wasn't returned.
Juan Monteverde, an attorney representing Hayden, declined comment from his office in New York City on Tuesday.
Hayden is asking a judge to declare it a class-action lawsuit so that other stockholders can join at a later time. The lawsuit notes that there were about 39.82 shares of Intrawest common stock outstanding, held by "hundreds to thousands of individuals and entities scattered throughout the country."
He wants the merger enjoined until Intrawest provides all information related to its decision and he wants the management executives and directors to account "for all damages sustained as a result of their wrongdoing."
The suit was filed in the U.S. District Court of Denver.
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