Proposed Vail Resorts acquisition of Whistler includes exchangeable share consideration (likely bearing dividends) and an exchange-rate adjusted cash component

Vail Resorts is proposing to acquire Whistler Blackcomb under a BC Plan of Arrangement for a combination of shares and cash, paid by a B.C. subsidiary of Vail Resorts (Exchangeco). Resident Whistler shareholders who so elect will receive the share consideration in the form of exchangeable shares of Exchangeco under a largely conventional exchangeable share structure, with those shares being listed on the TSX and having a sunset date seven years out. The cash component of the consideration is nominally in Canadian dollars, except that it is based on an exchange rate of 0.7765 so that, for example, if the exchange rate is less than this six days before the Arrangement implementation date, the Whistler shareholders will receive a correspondingly lower amount.

The Vail shares currently have a dividend yield of around 2%. The U.S. tax disclosure points out that if (contrary to expectation) the exchangeable shares were issued after 2016, any dividends paid on them would be subject to U.S. withholding tax under Code s. 871(m).

Neal Armstrong. Summary of Whistler Blackcomb Circular under Mergers & Acquisitions – Cross-Border Acquisitions – Inbound – Exchangeable Share Acquisitions.