Wednesday, May 30, 2012

Greenbrier Offers to Acquire Wintergreen Ski and Golf Resort

(Photo Credit: The Greenbrier)

May has been a busy month for ski/golf resort mergers. Just last week, golf development giant Ginn Resorts sold its interest in Burke Mountain to nearby Jay Peak. Now numerous media sources are reporting that billionaire James C. Justice II, owner of the Greenbrier, has offered to purchase Virginia's Wintergreen ski and golf resort. Justice told the Charleston, W.Va., Gazette on Friday that the deal was valued between $12.5 million and $16.5 million.

Wintergreen Resort (www.wintergreenresort.com) is a four season resort located in western Virginia not far from the West Virginia border.  The ski resort has over a 1,000 ft. vertical drop, 100% snowmaking and 2 high-speed 6-passenger chairlifts. Wintergreen also boasts a large tennis facility and 2 golf courses, one of which (Devil's Knob) is the highest golf course in Virginia. The Ellis Maple designed course soars to 3,850 ft and affords 50-mile views of the Shenandoah and Rockfish Valleys.

The deal comes at a time when Wintergreen is struggling financially in the wake of two very poor snow winters. In December, the resort defaulted on a line of credit from Bank of America. However as our sister site Ski, Esq. reported earlier this month, the resort did receive a bit of good news when it settled claims with the Virginia Department of Taxation regarding conservation easements located on part of its property. The timing of the proposed acquisition and the settlement can hardly be a coincidence.

Transactions often hinge on the ability of one party to resolve outstanding liabilities. Much of what corporate lawyers do is nailing down open items on lengthy due diligence checklists. It's not glamorous work, but it is necessary to ensure that both sides get what they bargain for.

Deals of this nature generally take some time to come together, meaning that lawyers from both sides were likely busy at work on a proposed acquisition prior to the settlement with the Dept. of Taxation. My experience with these types of transactions leads me to believe that the resolution of the conservation easement tax dispute was almost certainly a condition precedent to the acquisition. In fact, had I represented the buyer I would have advised my client not to proceed until a settlement had been reached. The reason is quite simple. Until the matter was resolved, it would be impossible to value the company. If the liability was, let's say, $10M instead of $1M, the company would effectively be worth $9M less. That's a lot of money, even to a billionaire like Justice. It seems likely Justice waited until the settlement was finalized to move forward with the purchase.

Lastly, it should be noted that Wintergreen (technically, "Wintergreen Partners, Inc.") has a unique ownership structure in that it is a not-for-profit membership corporation. Most media outlets are reporting the deal as if it is a fait accompli, but the acquisition remains subject to approval by Wintergreen's Class A Equity members.

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