Peak Resorts’ largest investor has ties to opioid manufacturer
DEERFIELD VALLEY- The Sackler family, owners of Purdue Pharma, have acquired controlling interest in Peak Resorts, the parent company of Mount Snow, according to documents filed with the Securities and Exchange Commission. The Sackler family and their company Purdue Pharma, makers of OxyContin, are the subject of multiple lawsuits alleging their aggressive marketing led to the opioid crisis sweeping the nation.
On November 21, 2018 Peak Resorts filed an amended SEC Schedule 13D, a form required when any group or individual acquires more than 5% of the stock in a company. According to Peak Resorts documents, Cap 1 LLC acquired a total of 15,345,41 shares of Peak Resorts’ common stock, giving them 53.4% of shareholder voting power in the company. According to another SEC filing by Peak Resorts, Cap 1 LLC is owned by a company that serves as trustee to a trust, the beneficiaries of which are Richard S. Sackler, MD, and Beverly Sackler. David Sackler is listed as president of Summer Road LLC, a company that “serves as family office and provides investment management services to Cap 1 LLC.” The ownership statement appears to be a change from an earlier filing by Peak which stated that Cap 1 LLC was “wholly owned by Richard Sackler, MD, and Jonathan D. Sackler.”
According to Peak’s SEC Schedule 13D, the Sacklers also personally own stock in Peak. Richard Sackler owns 102,595 shares or 0.7 % of the common stock, David Sackler owns 100,000 shares or 0.7% of the common stock, and the Richard and Beth Sackler Foundation owns an additional 26,200 shares or 0.2% of common stock.
The acquisition could not have come as a surprise to Peak Resorts officials, or their stockholders, however. The acquisition stems from a deal between Peak Resorts and Cap 1 LLC to finance their $76 million purchase of Snow Time last fall. Snow Time owns and operates three ski resorts in Pennsylvania, including Liberty Mountain Resort, Whitetail Resort, and Roundtop Mountain Resort.
According to Peak’s press release announcing the Snow Time deal, the proposed financing included a $50 million loan with a two-year term from Cap 1 LLC, and the proceeds of the $20 million sale of 20,000 shares of convertible preferred stock. Convertible preferred stock can be converted into common stock.
Peak Resorts publicly announced the deal in September 2018, and filed an SEC Schedule 14A proxy statement with a notice for a special meeting of stockholders to approve the issuance of $20 million in preferred stock to Cap 1 LLC.
The proxy filing detailed the risks to the company and to investors if they were to approve the deal, including the dilution of their current stock and stockholders’ voting power, Cap 1 LLC’s right to nominate a director to the board, and the possibility that Cap 1 LLC could convert their preferred stock, exercise their stock warrants, and dominate shareholders’ voting power.
“While obtaining 54% of the company’s voting power would require Cap 1 to pay approximately $57.5 million in aggregate exercise prices ranging from $6.50 to $10 per share, Cap 1 may, in the future, have the ability to control the outcome of any matter submitted for the vote of the holders of our common stock.”
Stockholders approved the deal, and the risk has become a reality. Prior to the deal, Cap 1 LLC owned 38.7% of Peak’s common shares. In 2016, Cap 1 LLC owned just 8.7%.
Peak Resorts and Mount Snow declined to comment for this article.
Deerfield Valley Reps. John Gannon and Laura Sibilia both say Peak Resorts and Mount Snow have been exemplary members of the community. “The leadership and staff at Mount Snow have been and continue to be important and generous partners in the valley,” Sibilia said. “Time after time Mount Snow has come to the aid of individuals, businesses, and even the entire valley. They have sheltered our people after disaster and been generous in times of tragedies. Mount Snow provides products, employment, and services that many other valley businesses leverage and many employees live off of and that has caused many others to invest in our valley.”
“Peak Resorts really turned things around at Mount Snow,” Gannon said. “I would hate to see this take away from the great work that Peak Resorts and Mount Snow have done, and their investments in the valley like West Lake and Carinthia. This year crowds there are incredible, even though it’s not a great snow season, which is great for our valley. Especially with the demise of the Hermitage Club. They deserve tremendous credit.”
Yet the company’s connection to the Sackler family and their fortune built on the opiates that have devastated the community is a concern. “It is disturbing,” Gannon said. “What the Sackler family did through Purdue Pharma with OxyContin, if the allegations stand, they are, if not primarily responsible, very responsible for the opioid epidemic in Vermont and the US. And that’s reprehensible. It’s sad that their money is invested in Peak Resorts. It’s money that was not honestly earned.”
“What Purdue Pharma is accused of is abhorrent,” Sibilia said. “The level of human suffering and loss associated with the promotion and profiting of opioids is unfathomable. Countless lives have been altered and destroyed.”
Should Peak Resort’s largest shareholder benefit from local public spending?
At least one valley resident, Ken Donald, has questioned whether it is no longer ethical for valley towns to allow public funds, including economic development grants and incentives, to go to Mount Snow, since the ultimate benefactor of the funding could be the Sackler family. In the past, Mount Snow has received funding from Dover’s 1% local option tax fund for events.
At Town Meeting, voters in Dover approved the creation of a tax stabilization program for commercial and industrial properties in the town. The program has the potential to benefit Peak Resorts.
A tax stabilization program allows for a graduated increase of taxes. If, for example, a commercial property is assessed at $100,000 and it is improved to the extent that its assessed value rises to $200,000, tax stabilization would allow the property’s owner to gradually increase taxes over time to reach the higher amount.
The Town Meeting article pertaining to tax stabilization was petitioned by Mount Snow Director of Development Laurie Newton. Although the tax stabilization would benefit any large scale developer, public discussions focused on the benefit to Mount Snow.
At Dover’s pre-Town Meeting and at Town Meeting, Neratko spoke in support of a tax stabilization program in the town, saying that any economic development tools the town has in its pocket makes it a more desirable location for potential businesses.
Statute allows for the selectboard to enter into such agreements itself, and the language of the original article reflected that. On the recommendation of town clerk Andy McLean, the original article was amended at Town Meeting so that voters must ratify each tax stabilization contract that the selectboard negotiates. In discussions leading up to the vote, McLean cited the potential for board conflict of interest with Mount Snow as a driving factor behind his recommended amendment. He also noted that a project that Mount Snow would take on has the potential to have financial impact.
As approved, the tax stabilization program will only apply to the municipal tax on a property. Neratko says that although some towns work with school districts to include school taxes in a tax stabilization program, that was not something that was part of the conversation in Dover.
The selectboard has yet to define its policy for tax stabilization. Voters’ approval at Town Meeting essentially opened up the process of creating that policy. Neratko says his business and workforce development group is set to begin drafting a potential policy next week, which will then be brought to the selectboard for consideration.
Though set policies and procedures have not been arrived at yet, it is likely that the selectboard will evaluate applicants based on criteria and, if they decide an applicant meets the criteria, they will negotiate a tax stabilization contract. Due to the amendment made at Town Meeting, that contract will then need to be ratified by the voters. Neratko says Dover is the only community he is aware of that requires a referendum for each contract.
“And that’s a real check and balance,” he says.