Vail Resorts to Buy Stowe Mountain Resort Operations From AIG -- 4th Update
February 21 2017 - 2:39PM
Dow Jones News
By Ezequiel Minaya and Leslie Scism
Vail Resorts Inc. agreed to buy the ski operations of Stowe
Mountain Resort in northern Vermont for about $50 million from
insurance giant American International Group Inc.
Vail Resorts will acquire Stowe's ski business, related
infrastructure and machinery and summer season on-mountain
attractions. AIG will retain ownership of most of the Spruce Peak
base area, including Stowe Mountain Lodge, Stowe Mountain Club and
future development rights.
The Stowe purchase is the latest deal for Broomfield,
Colo.-based Vail, which has been increasingly buying up ski resorts
near urban centers and then investing in improved infrastructure as
a way of increasing visitors. Last year, Vail struck a deal to buy
Canadian ski-resort operator Whistler Blackcomb Holdings Inc. for
roughly 1.4 billion Canadian dollars. Earlier, Vail acquired the
Wilmot Mountain ski resort in Wisconsin, roughly 65 miles north of
Chicago.
Christopher Agnew, managing director at MKM Partners, said the
Stowe purchase "taps into the huge markets in Boston and New York,
and those customers will come out west as well."
Vail said unseasonably warm weather in November pushed results
below company and Wall Street expectations for the latest quarter.
Still, the company said colder temperatures and snowfall improved
later in the month and noted that November represented a
"relatively small portion" of ski season revenue.
For Stowe, the purchase closes part of a connection to the small
Vermont town that has lasted more than 70 years.
Stowe has been part of AIG since the 1940s. Real estate
ownership isn't unusual in the insurance industry, with many of the
bigger insurers keeping a small slice of their investment
portfolios in property. It is a way to diversify their risk, and
potentially achieve better longer-term returns than they can get
with high-quality bonds.
The Stowe ski resort stands out, however, as it is has played a
role in the company's history over the years as a well-known
vacation spot for AIG's athletic managers. AIG's involvement was
the idea of the company's founder, Cornelius Vander Starr. Though
he hadn't taken up skiing until his mid-40s, he had an "enthusiasm
for sport and an interest in real estate," according to "The AIG
Story" by longtime AIG Chief Executive Maurice R. "Hank" Greenberg,
who left the insurer in 2005 and also was an avid skier.
According to an article on Stowe's website written by a local
historian and longtime ski-patrol member, in 1943 Mr. Starr and his
wife visited Stowe and the executive was disappointed at having to
wait in line for two hours for a ride up the single chair.
Mr. Starr "offered to put up 51% of the funds for another lift,"
the website says. "Thus began AIG's involvement in Stowe which
eventually led to their ownership of the resort," the site
says.
AIG has been in the real-estate business since 1987 and built
the group into one of the world's largest property investors, with
about $25 billion in assets before the financial crisis.
The transaction is the latest move by AIG to narrow its focus to
core property-casualty and life-insurance businesses. The company
is using proceeds from many of the divestitures to finance an
ambitious two-year plan to return $25 billion to shareholders
through stock repurchases and dividends. As of early February, AIG
was more than halfway to the goal.
The divestiture program began as an effort to repay U.S.
taxpayers for a nearly $185 billion bailout during the 2008-09
financial crisis. AIG fully repaid the government by the end of
2012, and had shrunk to about half it precrisis size in terms of
total assets on its balance sheet. Even as it shrank, AIG remained
one of the world's biggest sellers of insurance to businesses, by
market share.
Now, Chief Executive Officer Peter Hancock is trying to sell
additional businesses, reduce expenses and make changes in the
insurance-product mix in a bid to boost profitability. The
management team is trying to satisfy activist shareholders Carl
Icahn and John Paulson, who in 2015 publicly called for AIG to
break into smaller pieces. Last year, Mr. Paulson and a
representative of Mr. Icahn joined AIG's board.
Earlier this month, Mr. Hancock's plan suffered a setback when
fourth-quarter results badly disappointed, in large part because of
an unexpectedly large $5.6 billion boost to the company's
property-casualty claims reserves. The company also announced that
two profitability targets set for accomplishment by year-end
wouldn't be achieved then.
In another real estate deal, AIG Global Real Estate announced in
November it had completed the sale of the International Finance
Centre Seoul to Brookfield for an undisclosed amount.
Write to Ezequiel Minaya at ezequiel.minaya@wsj.com and Leslie
Scism at leslie.scism@wsj.com
(END) Dow Jones Newswires
February 21, 2017 14:24 ET (19:24 GMT)
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