HUNTER — One of the stockholders for Hunter Mountain is suing its owner over a pending transaction to change ownership.
John Field filed a lawsuit in the Eastern District Court of Missouri against Peak Resorts, Inc., the company that owns Hunter Mountain and 16 other resorts throughout the country.
Peak’s board of directors is also listed as defendants.
In July, Peak announced it had entered into a merger agreement with Vail Resorts, Inc., a company that owns 17 mountain resorts and three urban ski areas, RockResorts hotels and Grand Teton Lodge in Wyoming.
The transaction, which was expected to close this fall, meant Vail would purchase all outstanding shares of common stocks of Peak Resorts for $11 per share at a 116% premium.
The lawsuit alleges that Peak Resorts omitted pertinent information from its analysis of the merger.
“Unless remedied, Peak Resorts’ public stockholders will be forced to make a voting or appraisal decision on the proposed transaction without full disclosure of all material information concerning the proposed transaction being provided to them,” according to court papers.
Such information includes a fairness opinion provided by Peak’s financial adviser Moelis & Company LLC and potential conflicts of interest for Peak executives, according to court papers.
This information is relevant because the company’s insiders, such as executives and board members, will receive greater benefit from the sale than the public stockholders, according to court papers.
“Peak Resorts insiders are the primary beneficiaries of the proposed transaction, not the public stakeholders,” the lawsuit alleges. “The board and the company’s executive officers are conflicted because they will have secured unique benefits for themselves from the proposed transaction not available to [Field] and the public stockholders of Peak Resorts.”
The merger agreement allows restricted stock units to vest and convert into cash payments, according to court papers, resulting in payouts of $209,121 for President and Chief Executive Officer Timothy D. Boyd, $340,582 for Chief Financial Officer Christopher Bub, $157,443 for Vice President of Business and Real Estate Development Richard Deutsch and $75,702 for Executive Vice President and Director Stephen Mueller.
Non-Peak employees who sit on the board — Stanley Hansen, Carl Kraus, Christpher O’Connor and David Baswell — will receive $479,996, $479,996, $479,996 and $333,278, respectively.
In terms of Moelis’ fairness opinion, stockholders are not given the tools necessary to understand how the firm arrived at their opinion, according to the lawsuit.
“Without this information, Peak Resorts’ public stockholders are unable to fully understand these analyses and thus are unable to determine what weight, if any, to place on Moelis’ fairness opinion in determining whether to vote in favor of the proposed transaction or seek appraisal,” according to court papers.
This type of opinion is moot, Field’s attorney Matthew Dameron alleged.
“When a banker’s endorsement of the fairness of a transaction is touted to stockholders, the valuation methods used to arrive at that opinion as well as the key inputs and range of ultimate values generated by those analyses must also be fairly disclosed,” according to court papers. “The omission of this information renders the statements in the “Opinion of Moelis & Company LLC” and “Management Projects” sections of the Proxy Statement false and or materially misleading.”
Moelis & Company declined to comment on the matter.
The Proxy Statement also failed to disclose retention of Peak employees post-transaction.
“This information is necessary for the stockholders to understand potential conflicts of interest of management and the board, as that information provides illumination concerning motivations that would prevent fiduciaries from acting solely in the best interests of the company’s stockholders,” according to court papers.
Dameron alleged that the sections “Background of the Merger” and “Interests of the Company’s Directors and Executive Officers in the Merger” of the Proxy Statement are also false and or misleading.
Field, in his lawsuit, is asking the court to stop the transaction from going further until the missing materials are provided to the stockholders.
If the sale closes, Field is asking for it be rescinded and damages awarded to him.
Leaders of both Peak and Vail resorts expressed their enthusiasm for the sale in July.
“We are now delighted to announce this agreement with Vail Resorts that creates substantial value for our shareholders and new opportunities for our guests,” Boyd said. “During my time in the industry, I’ve come to know and respect Vail Resorts and believe they will build on our accomplishments and further improve the experience that our loyal guests enjoy both on and off the mountain.”
Rob Katz, chairman and CEO of Vail Resorts, was equally enthusiastic in July.
“We are incredibly excited to have the opportunity to add such a powerful network of ski areas to our company,” Katz said. “Peak Resorts’ ski areas in the Northeast are a perfect complement to our existing resorts and together will provide a very compelling offering to our guests in New York and Boston. With this acquisition, we’re also able to make a much stronger connection to guests in critical cities in the Mid-Atlantic and Midwest, and build on the success we have already seen with our strategy in Chicago, Minneapolis and Detroit. Tim and his team have assembled a fantastic array of resorts and created a strong and loyal guest network. We look forward to welcoming Peak Resorts’ guests and team members to the Vail Resorts family.”