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Vail Resorts Buys Park City Mountain; Shares Jump 12%

Vail Resorts Inc. (MTN) announced the acquisition of Park City Mountain Resort from Powdr Corp. for $182.5 million in cash. However, the amount is subject to certain post-closing adjustments.

The deal also brings a marathon legal battle between Vail and Powdr to an end, thereby allowing Park City Mountain Resort to operate normally this ski season. In fact, the shares of Vail Resorts jumped almost 12% in the trading session, yesterday, as news of the acquisition filtered in.

As part of the acquisition, Vail Resorts will get all the assets of Greater Park City Company (:GPCC) which includes the land used as ski terrain as well as the parking, lift ticket offices, and other activities for a functioning ski resort. The base also has zoning approval for almost 700,000 square feet of residential and commercial development. However, Powdr will retain the Gorgoza tubing operation, located roughly 10 miles from the resort.

Immediately after the acquisition, Vail announced plans to include Park City Mountain Resort in its Epic Pass — a popular season pass which includes access to 22 resorts — for the 2014-15 ski season. The company also intends to connect its neighboring resort, Canyons, with Park City Mountain beginning the 2015-16 season, making the combined entity the largest resort in the country.

Vail Resorts also announced that due to the acquisition, it expects $35 million in incremental EBITDA for fiscal 2015, excluding any transaction and transition costs. The company expects to benefit from the acquisition in the upcoming period, particularly after it secures permission to connect the Canyons, with Park City Mountain Resorts.

Further, the company expects the acquisition to provide significant tax benefits over the next 15 years. We believe that the deal will be beneficial for Vail Resorts as it adds yet another primary, well-known property to its portfolio.

However, Vail Resorts had to court a lengthy legal battle. This began during 2011-end, when Park City Mountain Resort failed to renew its lease on the upper 85% of its terrain, which it was leasing from Talisker. When Talisker brought it to light and declared that Park City Mountain Resort was not a lawful tenant, Powdr disagreed and filed a lawsuit.

About a year later, Vail Resorts acquired Canyons from Talisker and got involved in the legal battle. As part of this deal with Talisker, Vail Resorts assumed the rights to Park City’s disputed terrain. However, recently, a judge reportedly asked the two companies to settle the dispute mutually.

Vail Resorts currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same sector include HomeAway, Inc. (AWAY), Diamond Resorts International, Inc. (DRII) and Carnival Corporation (CCL). All these stocks carry a Zacks Rank #2 (Buy).

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