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
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