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Ok - so why? Why is Aspen better together with Steamboat and WP and a collection of eastern resorts?
If they don't use a common pass to draw destination skiers - precisely what Vail is doing - then what is the "together" part? The FAQ in that article is all about pass products, and it only says "no changes for next season".
I get this could purely be a money play, and that's KSL's business, but Aspen?
You know that kids song that goes "Which one of these things is not like the other? Which one of these things just doesn't belong?"
I didn't mean to sound dogmatic before about operating fundamentals not being an important part. But here it doesn't need to be for this transaction to get done. A 40% pop is enough to incentivize any capital group, particularly private capital, to do this with no further incentive.
I also would point out consolidation is only one of the possible strategic responses to Vail but it certainly is one of them. As are strategic alliances, i.e. MCP, as is accumulation of assets to compete directly against Vail. I do think the decline in skier day factor is not as much a threat to upper tier resorts as some might argue. We're coming out of an extended recession, the metric isn't affecting resorts evenly, etc. This transaction given the premium being paid to stock shares is not defensive it's optimistic.
So why is the premium being paid? Is it to improve fundamentals and compete against Vail? Is it because there's an enormous bump in value through leverage that could not otherwise be accessed? Is it even identifiable to us?
We could be more certain as to which if we really knew the ownership structure here. Control may be changing little, almost not at all or completely. This could be nothing more than going private with KSL and Aspen having little or no ownership stake or they could have the whole thing. The difference between strategic alliance and change in ownership and control becomes easily blurred making conclusions about consolidation difficult from afar.
My best guess, based on my understanding of private equity today is they'lll access a position figuring a benefit from the stock price, plan on a 10 year horizon and figure out how to grow value during that time. They'll hope they can either take on Vail directly or carve out a niche or pass Vail when Vail fails at meeting growth expectations which will happen. Normally they would insist on control of eventual asset sales but with the 40% maybe not. 40% is enough by itself to get this deal done with no other ups and it is definitely attributable to the value of debt being accessed. That said no investment pro would ever admit that.
If you look at KSL's holdings there are examples of successful sales around 10 years and those that also languished . They bought Club Corp. in the golf world for an upfront pop knowing it was in a declining industry but it didn't matter they made their money upfront. If the recent past teaches anything it's that capital flows in and out of debt and between public and private overwhelm all other factors during capital windows like this, looking at yields. An analogy might be a big storm during a drought year.
So now to your question about Aspen. Let's say you're them. If you choose to grow then how? One way would be to use funds from the owners and the value of what they now own and acquire assets or stakes within them. Another would be to take their brand and obtain management contracts. The former involves risk, the latter does not. My suspicion here is they are mostly or completely acting as a manager. It doesn't mean they won't get a piece or that they won't invest anything. But it would be a smart way to approach and grow their business. The Vail bogey doesn't just stand for scale it also involves consistency and efficiency of operations. The Aspen brand is certainly worth something here. Compare it to Vail resorts LOL. (I try to avoid texting abbreviations like that but it just fits too well here. Or maybe ROFL., etc.)
There are also structural aspects given KSL and the private equity source that would make it unlikely Aspen would have a meaningful financial stake. This is something perhaps Bob at some point can illuminate. It's likely equity wanted their brand and is happy to give them management.
Aspen would then have an increased incentive to build its brand and I would expect advertising as you have attached above to reflect that. Bob and his associates would have advancement and managerial opportunities, The organization would get to grow and unlike Vail they could pay for and attract excellence. it would be good business for Aspen to focus on risk-free bottom line that creates personnel growth health. If this all had the additional benefit of increasing traffic at Aspen then yes an added incentive, and vehicles for doing this are limitless, but without that the management avenue would still make sense and this will still have "made Aspen better."