Snowed Under
Elisa Williams, 04.16.01
Takeovers — Has Leucadia Chairman Ian Cumming met his match in the backwoods of Oregon?
Few can match wits with corporate bottom feeder Ian Cumming when it comes to wringing money out of white elephants. The media-shy head of Leucadia National did it with insurer Colonial Penn and Sperry & Hutchinson of S&H Green Stamps fame, and now is at work on a $6 billion bailout of ailing Finova Group.
But Powdr Corp., the undervoweled outfit owned by Cumming and his sons John and David, got more than it bargained for when it bid on a remote Oregon ski resort.
For folks who usually traffic in billion-dollar companies, the 8,122-acre Mt. Bachelor resort in Oregon's Deschutes National Forest probably looked like easy pickings. The mountain lost $207,100 on $22 million in sales last ski season and attracted only 480,010 skiers, down from a recent peak of 582,000 in 1995. The dividend was suspended.
The Cummings have been lusting after Mt. Bachelor since 1996 but were initially rebuffed by the scattered families who control the stock. With a portfolio that includes Park City Mountain Resort in Utah and three California ski areas, Powdr could use Mt. Bachelor to provide more geographical diversification and boost its projected $63 million in revenues by about 30% this year.
So in December, when Mt. Bachelor looked for buyers, the Cummings offered a lowball bid of $28million, $6 million less than they had offered in 1996. In time they got the support of Mt. Bachelor's founding family. "John [Cumming] is a mountain man," swoons Beverley Healy, widow of the resort's founder.
But what they didn't count on was Randall Papé. In his day job Papé sells tractors and small airplanes from Eugene, Ore. His family is Mt. Bachelor's largest shareholder, with 23% of the 1,382 shares.
As Papé saw it, the Cummings were exploiting turmoil on the board and Mt. Bachelor's current troubles to steal the property from its local owners. "We had, in effect, done a shotgun sale, and the timing was terrible," says Papé, whose board supporters snubbed the Cummings.
Fed up, the Cummings launched their bid as a hostile takeover, offering $20,100 a share and even throwing in a sweetener of free lifetime ski passes. Papé upped the ante with his own competing offer of as much as $26,000 and brought in Intrawest, the big Canadian ski conglomerate, as his partner.
The Cummings claim they were tendered a majority of the shares in March, but it may be a Pyrrhic victory. Many ski operators make less money on skiing than they do on real estate or amenities. That could be a challenge at Mt. Bachelor, which sits in a national forest and faces more than the usual red tape if it tries to develop slopeside lodgings. As it is, the nearest overnight accommodations are about 20 miles away, in Bend or Sunriver.
And Papé isn't going away. Just as the Cummings declared victory, Papé managed to tangle them up in court with a temporary restraining order that put the deal on ice.
"Listen, you're talking to somebody who survived upper bowel cancer," says Papé. "I was diagnosed to be terminal five years ago. So this is peanuts compared to that."
