Ralcorp's Ski Unit Joining Vail Resorts Combined Firm Will Be One of Nation's Largest

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Ralcorp Holdings Corp. of St. Louis has agreed to sell a majority stake in its ski-resort business in Colorado in a $310 million deal, the company said Tuesday.

Vail Resorts Inc., which owns the Vail and Beaver Creek Resort ski areas, will acquire Ralcorp's Keystone, Arapahoe Basin and Breckenridge ski areas as well as other land holdings.

Vail Resorts will pay Ralcorp $135 million in cash, assume $30 million in Ralcorp notes and give Ralcorp a 25 percent stake in the combined companies.

The combination of the two companies' ski resorts will create one of the largest ski companies in Colorado and the nation.

Ralcorp will use proceeds from the deal to trim its debt to about $211 million from the current $376 million. By keeping a 25 percent stake in the resorts, Ralcorp will avoid some tax liability.

The sale also will remove the only non-food business from Ralcorp, the nation's leading maker of private-label cereals as well as Beech-Nut baby food and private-label cookies and crackers. The resort business accounted for about 15 percent of Ralcorp's operating profit in its last fiscal year and about 13 percent of its $1.01 billion in sales.

With the cereal business mired in a price war, the outlook for Ralcorp earnings is uncertain. Operating profit for Ralston's food businesses fell 74 percent in the second quarter amid heavy promotions by other cereal companies and a steep rise in ingredient costs. Major cereal companies have cut prices since then.

In response, Ralcorp laid off 100 of its headquarters staff and cut production in half at one of its cereal plants.

Ralcorp expects to release results for the quarter ended June 30 on July 31.

The deal puts Ralcorp in partnership with New York investor Leon Black, who controls Vail Resorts through his Apollo Partners Ltd. Another of Black's companies, Apollo Lion Advisors, owns 67.4 percent of St. Louis-based Furniture Brands International Inc., formerly called Interco Inc.

Vail Resorts has postponed a planned initial public offering until the merger with Ralcorp's resorts is completed later this year. After the offering, Apollo Partners would own 55 percent of the company and Ralcorp would own 25 percent, a Vail spokeswoman said. Shares representing the remaining 20 percent interest would be sold to the public.

Together, the Vail and Ralcorp resorts have ski runs spanning nearly 10,000 acres in the Colorado Rocky Mountains. They log about 5 million skier visits a year and about $300 million a year in sales. …