March 19, 2001
MAINE STOCK TRENDS
American Skiing stockholders are on the losing end of this deal.
Copyright © 2001 Blethen Maine Newspapers Inc.
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A great winter does little for American Skiing Co. (March 12, 2001)
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In a week that saw major stock indices drop between six and eight percent, the losses in Maine were, for the most part, a lot less. Among the companies hit hardest was I-Many (IMNY-$10.06), which dropped 28.06 percent for the week. On the upside, American Skiing Company (SKI-$1.20) was the top performer among Maine stocks, closing up more than 11 percent for the week.
But last week's performance by American Skiing was an aberration. The company went public at $18 a share in November 1997 and has never closed above that price. Today, American Skiing trades 93.33 percent lower. In three plus years as a publicly traded company, American Skiing has lost more than $130 million. It has fallen far short of both resort and real estate revenue projections every year.
The story doesn't get better, unfortunately. This year, a year in which many would argue is one of the best years for skiing in recent memory, the company has reported six-month losses totaling $34.6 million.
In addition, non-insider shareholders once controlled more than 49 percent of the company. This week, shareholders will vote to dilute their interests to approximately 12 percent in a merger with MeriStar Resorts (MMH-$1.88). If the merger goes through, stockholder ownership of the combined company will be further diluted to less than 8 percent.
Since its inception, the company has been loaded with way more debt than it ever should have had. In 1999, a decision was made to bring in Oak Hill Capital as an equity investor, and what probably should have happened long before that was a sale of some strategic assets. Now, given the economy, the stock market, and the recent track record of the ski resorts, it is unlikely that the American Skiing properties could be sold today at prices sufficient to pay off all of the company's debt and still provide anything meaningful to shareholders.
All of this, however, may be moot. American Skiing as we know it, will effectively be gone by the end of March with the MeriStar merger. The name will change to "Doral International Inc.," the headquarters will move out of state, and the company will get a new CEO and CFO. Shareholders who once owned nearly 50 percent of the company will find themselves owning about 12 percent of the pre-merged company and less than 8 percent of the merged company. Oak Hill will end up with majority control of the combined entity.
What lies ahead for Doral? If management and directors of the combined companies provide any indication through their past activities, there may be little cause for optimism. MeriStar shareholders have lost 37 percent from the July 1998 $3 offering.
American Skiing's final shareholder meeting is scheduled to take place in Newry, Maine this Friday, March 23, at 4 p.m. However, American Skiing shareholders don't have much of a chance to kill the proposed merger because those with control of company stock already have voted in favor of it.
Brad McCurtain is president of Maine Securities Corporation. Maine Securities Corporation is an investment firm specializing in Maine's securities. From time to time, the corporation, its employees, and its clients may buy, hold, and/or sell positions in companies mentioned herein. As a regulated securities broker/dealer, the company and its employees are required to abide by all securities regulations at all times when communicating with the public. Brad McCurtain may be reached at info@MaineSec.com. Web site: http://www.MaineSec.com