Why Shares of Vail Resorts, Inc. Popped 11% in August

By Markets Fool.com

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What happened

Shares of iconic ski resort operator Vail Resorts, Inc. (NYSE: MTN) jumped 10.8% in August, according to data provided by S&P Global Market Intelligence, after announcing a major merger agreement. And it could change the company for a long time to come.

So what

Vail agreed to combine with Whistler Blackcomb Holdings, the major ski resort company based north of Vancouver. Vail will buy Whistler Blackcomb for 17.50 Canadian dollars per share in cash and 0.0975 shares of Vail stock, totaling $36.00 per share for the company.

The deal will give the combined companies more leverage in marketing and, maybe more importantly, geographic diversification. Winter seasons have become very variable and snow can be strong in one region and weak in another. This should help level out revenue for the companies over the long term.

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Now what

Scale may be a key differentiator in some businesses, but in skiing and snowboarding, I don't see it being a way to bring in more customers or fight off competition. People visit resorts because they're fun, have snow, and are a good value. None of those factors changed in this merger. Maybe the diversification will hide some weakness at one resort for a while, but overall revenue is going to be the same. As a result, this isn't a pop I'd be excited about in the resort business.

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Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends Vail Resorts. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.