Northeast Ski Resorts Heading for a Merger

A New England ski magnate buys out his former mentor

THE New England ski industry faces its biggest consolidation yet. Last month entrepreneur Leslie Otten made a roughly $104 million cash tender for archrival, publicly owned S-K-I Ltd. Shareholders are expected to approve the cash merger in the next 60 days.

Mr. Otten already owns the huge Sunday River ski resort in Maine. He bought it 24 years ago from his then mentor and employer, Preston Leete Smith, founder of Vermont's giant Killington ski area and now chairman of its parent company, S-K-I.

Both men went on to expand their resorts, primarily through reputations for dependable snowmaking.

Becoming bitter rivals in New England's market-share battle, they each made their ski mountains among the very few to make any money nationwide. Each also has acquired other well-known but often faltering ski resorts. S-K-I now owns five; Otten's LBO Enterprises four. All are in New England and together see more than 3 million skier visits annually.

Among those shocked by Otten's audacious move was Mr. Smith himself. ''I had 20,000 shares of S-K-I stock on the market only five days before,'' he says. Only when an investment banker for Fleet Bank and Bank of Boston presented a $140 million financing plan to S-K-I's board of directors ''did we realize how serious he was.'' Within five days the board voted to present to shareholders the $18 a share cash-tender offer, about a $4 premium over the pre-offer market price

Smith says he won't disclose his feelings at least until after the merger is completed. Others have not been so reticent. Some of the questions being asked:

How will the merger affect the already expensive cost of skiing? Otten says he intends to prevent the price of skiing going up beyond inflation but ''not to force the price down'' in this capital-intensive industry that ''barely gets enough return to reinvest in itself. Skiing's always been expensive.''

Others see two tiers of ski areas continuing in the short run, with smaller, less expensive ski areas giving way to expanding premium resorts offering committed skiers reciprocal lift tickets.

Can consolidation help ''grow the sport,'' as Otten forecasts, despite skiing's virtually flat growth rate for some 20 years? The $1.5 billion-a-year industry nationwide is only now returning to its mid-'80s peak of skier visits.

Otten says he can help US skiing and snowboarding grow 30 percent - to 70 million skier visits annually - over the next 10 to 15 years, not with lower prices but with help from a blip in the birth rate that will bring an ''influx of kids'' over the next decade. He promotes skiing as ''a highly exhilarating activity that is reasonably priced'' compared with scuba diving or adventure parks.

But some of Otten's keenest competitors are skeptical. ''It's still got to be market warfare,'' says Tim Mueller, chief executive of Okemo, a Vermont ski area. He asks what too much leverage and a couple of bad winters could do to the merger - and consequently to New England skiing.

Will Otten's new American Skiing Company and other resort combines like Canada's giant Intrawest ultimately replace traditional mountain cultures?

''Culture change is the only concern around here,'' says Nancy Marshall, publicist for Sugarloaf resort in Maine. Despite long fighting the rise of rival Sunday River, many Sugarloaf locals welcome Otten, she says, because they feel he will be more aggressive in developing the resort than S-K-I, which bought Sugarloaf two years ago. Similar feelings exist at Waterville Valley, which S-K-I was said to have had on the market before Otten's offer.

Environmental watchdogs, including the Conservation Law Foundation in Montpelier, Vt., prefer Otten's environmental record and attitude over Smith's long opposition to regulation. But they worry about the merger's future impact on growth.

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