Village Roadshow: BGH Capital gains court approval for takeover of Movie World owner
Shares in Gold Coast theme parks owner Village Roadshow will be suspended from trading by the end of the day following Federal Court approval for its takeover by BGH Capital.
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SHARES in Gold Coast theme parks owner Village Roadshow will be suspended from trading by the end of the day following Federal Court approval for its takeover by BGH Capital.
The move caps off a rollercoaster ride for shareholders that started in December last year when private equity house Pacific Equity Partners put forward a proposal to buy the Movie World owner for $3.90 a share.
BGH chipped in with its own offer of $4 per share in January - valuing Village at $780 million - but that was later slashed to just $2.20 to $2.40 a share due to the forced shutdown of the parks in March due to the coronavirus.
However, BGH came in for some stinging criticism from New York-based investors Mittleman brothers who slammed the offer as “highly conditional, unusually complex, and blatantly opportunistic”.
BGH was later forced to increase its offer to $3 per share under one scheme (whereby Village’s directors and major shareholders did not vote) and $2.95 under an alternative scheme.
That did the trick and on December 7, 75.76 per cent of shareholders present and voting at Movie World approved the first scheme and 68.78 per cent the second.
On Tuesday Village said the Federal Court had approved the first scheme.
Shares will be suspended from the close of trade today and implementation of the takeover is set down for December 29.
The takeover puts an end to the feud between brothers John and Robert Kirby, who owned a trust that controlled the Kirby family shareholding, over the direction Village would take.
Under the terms of the takeover they will remain shareholders in the new BGH vehicle along with former CEO Graham Burke.
Robert’s son - Gold Coast-based Clark Kirby - remains CEO.
In November, Village said without the takeover the company faced net debt climbing from $311 million (as of June 30, 2021) to between $370 million and $380 million by the end of FY21.
It said the business generated positive operating cashflow of $5 million (on a pre-capital spending basis) from July 1 to October 31 when government subsidies are taken into account.
However, it forecast negative cashflow of $5 million to $15 million between November 1 and June 30 next year on the same basis as well as $55 million in capital expenditure.
EARLIER: NOVEMBER 23
PRIVATE equity fund BGH Capital has boosted its offer for Movie World owner Village Roadshow to $3 per share to win over unhappy shareholders.
The Bulletin reported on Thursday that BGH was preparing a new offer following its announcement of a trading halt.
Sydney-based BGH had offered shareholders $2.32 per share under one scheme arrangement and $2.22 under another.
On Monday Village announced that BGH had increased the offer to $3 per share under one scheme and $2.95 under an alternative scheme.
A shareholders meeting on the schemes was originally scheduled for November 26 but had now been moved to December 7. The deadline for shareholders to make an election on which scheme they prefer has also been extended to November 27.
Village said substantial shareholder Spheria Asset Management, which has a 6.88 per cent stake in the company, had swung its support behind the takeover following the revised offer.
The new offer is now above the independent expert’s assessment of the value of Village shares being in the range of $2.03 and $2.80.
Village said without the takeover the company faces net debt climbing from $311 million (as of June 30, 2021) to between $370 million and $380 million by the end of FY21.
It said the business generated positive operating cashflow of $5 million (on a precapital spending basis) from July 1 to October 31 when government subsidies are taken into account.
However, it is forecasting negative cashflow of $5 million to $15 million between November 1 and June 30 next year on the same basis as well as $55 million in capital expenditure.
EARLIER: NOVEMBER 19
THE would be owner of Village Roadshow is preparing to lob a new offer at shareholders to win over unhappy shareholders.
Village Roadshow, which owns Movie World and Wet’N’Wild on the Gold Coast, on Thursday entered into a trading halt related to the takeover offer from BGH Capital.
The private equity firm had offered shareholders $2.32 per share under one scheme arrangement and $2.22 under another. A vote is scheduled for November 26.
Village said the trading halt was to enable the company to provide information about a material development related to the sale of the company to BGH Capital and that it would remain in place until the earlier of an announcement about the sale or the start of trading on November 23.
Market sources told the Bulletin that several funds were unhappy with the offers and wanted them increased.
It was suggested BGH may have top pay between $2.80 and $3 per share.
One of the unhappy parties is understood to be New York-based Mittlemen Brothers, which has a 14.34 per cent stake in the company and in the past has criticised the BGH proposal as “opportunistic”.
Earlier this month Village and BGH agreed to lock in a 12 cents per share bonus for Village shareholders due to the company meeting a requirement for its theme parks to be open for a period prior to the shareholders vote.
However, shareholders missed out on two other bonus payments - one for there being no changes to the cinema release schedule and another related to border closures with NSW and Victoria.
EARLIER: NOVEMBER 9
SHAREHOLDERS in Gold Coast theme park owner Village Roadshow will benefit from a bonus cash payment if they give the green light to the BGH Capital takeover at a meeting later this month.
Village on Monday announced that it has agreed with BGH to lock in the 12 cents per share bonus four days earlier than required.
The bonus was conditional upon Movie World and Sea World being open for a period prior to the shareholder meeting on November 26.
However, shareholders will miss out on two other bonus payments - one for there being no changes to the cinema release schedule and another related to border closures with NSW and Victoria.
The latter would have delivered 5 cents extra to shareholders if there were no border control measures with NSW by November 1 and Victoria by November 15.
Queensland did not open its border to residents from Greater Sydney on November 1 meaning that the requirement for the 5c payment was not met.
A booklet outlining the scheme arrangement from private equity firm BGH was sent to shareholders last month.
The proposal is actually two with the first option - preferred by directors - offering $2.32 per share with additional payments for the theme parks and borders reopening and the cinema release schedule remaining unchanged.
This would see BGH acquiring shares in Village’s ultimate holding company, held by John Kirby, Robert Kirby and Graham Burke, with the holding company going on to buy out all remaining shares. The holding company has 39.91 per cent of shares on issue.
A second option has a lower cash offer of $2.22 per share because of what are said to be additional costs incurred by BGH in implementation of the second proposal.
Last month an independent expert’s report came down in favour of shareholders approving the takeover.
According to Grant Samuels - the independent expert engaged by Village to report back on the scheme - the offer was fair and reasonable and in the best interests of shareholders in the absence of a better offer.
Grant Samuels said if not for the deal, Village would have to raise $300 million to keep the company afloat.
EARLIER: OCTOBER 14
THE independent expert’s report on the takeover of Gold Coast Movie World owner Village Roadshow has come down in favour of shareholders approving the deal at a meeting next month.
Village, led by Gold Coast-based CEO Clark Kirby, on Monday announced a meeting was set for November 26 for shareholders to vote on an offer by private equity group BGH Capital valuing the company at $450 million or up to $2.45 per share.
Shareholders were to receive a scheme booklet detailing the deal by October 21.
According to Grant Samuels - the independent expert engaged by Village to report back on the scheme - the offer was fair and reasonable and in the best interests of shareholders in the absence of a better offer.
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Grant Samuels said if not for the deal, Village would have to raise $300 million to keep the company afloat.
“Village’s financial position has deteriorated materially since the onset of the COVID-19 pandemic,” Grant Samuels said.
“Its debt levels have increased and earnings for FY21 and (to a lesser extent) FY22 will continue to be depressed.
“In the absence of the Transaction it is likely that Village would need to raise significant equity to address its debt refinancing obligations of circa $300 million during 2021.
“The prospect of such an equity raising would exacerbate the pressure on Village’s share price.”
The offer was for $2.20 per share plus an additional 12 cents if the theme parks were open more than two weeks out from the meeting, which was likely to be the case.
However, additional cash payments of 5 and 8 cents per shares conditional on the borders being open to NSW and Victoria in November and no changes to the movie release schedule were unlikely to be paid out.
Grant Samuels said the offer was a 31.4 per cent premium on the share price prior to Village’s announcement of exclusive negotiations with BGH in May.
Village shareholders have the option of taking all cash or a mixture of cash and shares in a new BGH controlled holding company.
Village received a boost when it arranged a new $70 million debt facility funding by its banking syndicate and, in part, the Queensland Government.
It has a near fully drawn facility of $230 million maturing in January 2022.
The company reported a loss of $117.4 million for FY20 following the impact of COVID-19 and the associated shutdowns of its theme parks and cinema businesses.
The result was much worse than the net loss last year of $6.6 million.
EARLIER: COVID-19 IMPACT CAUSES LOSSES
MOVIE World owner Village Roadshow has slumped to a $117.4 million loss following the impact of COVID-19 and the associated shutdowns of its theme parks and cinema businesses.
The result was much worse than the net loss last year of $6.6 million.
Excluding material items the loss was $43.4 million.
“After a strong start to the financial year, Village Roadshow has felt the full impact of COVID-19 shutdowns and restrictions,” CEO Clark Kirby said.
“With our incredible team, we are seeing light at the end of the tunnel as we reopen for business and look forward to more normal domestic travel patterns and the pent up demand for seeing movies on the big screen.”
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Village, which has entered into an agreement to be bought out by BGH Capital, was forced to close its Gold Coast theme parks on March 22 due to the spread of COVID-19.
It reopened Sea World on June 26 and Movie World and Wet’n’Wild on July 15 with COVID-safe plans in place and at 50 per cent of their normal capacity.
The company said attendance tracked 12 per cent higher before COVID struck.
Village said the combined impact of bushfires, flooding and COVID-19 closures in the second half had seen full year pretax earnings slump from $73 million to $35.2 million at its Gold Coast theme parks in FY20.
It said the first half had actually seen its Coast theme parks improve attendance by 12 per cent.
Attendance is between 30 to 35 per cent compared to the prior period with most visitors from Queensland due to the NSW border closure.
However, the company experienced attendance levels of between 65 and 70 per cent at Sea World and Paradise Country during the July school holidays.
Sea World occupancy was also 68 per cent in July despite restrictions being put in place at the resort.
Village said its theme parks are in a strong position to withstand challenges posed by COVID-19 with the first half supporting its strategy including around pricing.
The company received a boost when it secured $70 million in funding from its lenders and the Queensland Government.
This financial year it plans on opening its Vortex ride and Leviathan – the biggest wooden roller coaster in the southern hemisphere – at Sea World.
Village said it also plans on bringing back its White Christmas event to Movie World in December.
At its Australian cinema division pretax earnings fell from $54 million to $9.4 million.
EARLIER: AUGUST 7
MOVIE World owner Village Roadshow could be in new hands by November if shareholders approve the BGH takeover offer valuing the company at $758 million.
Village announced this morning following months of negotiations with BGH Capital that it had entered into an agreement for the private equity firm to acquire a controlling interest in the theme park operator.
DREAMWORLD TO REOPEN AFTER $70M EMERGENCY LIFELINE
Shareholders are being offered up to $2.45 per share, which is partially contingent on the reopening of Village’s theme parks and cinemas and Queensland’s borders being open to visitors from NSW and Victoria.
A shareholder vote is expected to be held by November.
The border with NSW and ACT will be closed tomorrow, which could present a problem for the deal being implemented.
New York-based activist investor Mittleman Investment Management, which has a significant stake in the company, is also on record being opposed to the deal, which it considers undervalues the company.
The Village board unanimously recommended the proposal, which if approved would result in directors including Robert Kirby and John Kirby retaining a stake in the new unlisted BGH company controlling Village.
Clark Kirby remains CEO under the proposal.
Peter Tonagh, who heads up the board’s independent committee, said the offer is in the best interests of shareholders, representing an opportunity to realise an attractive price for their shares in an uncertain operating environment.
EARLIER: $70M IN NEW FUNDING
MOVIE World owner Village Roadshow has revealed it has secured $70 million in new funding from its lenders and the Queensland Treasury, providing the company with enough cashflow to get it through the next 12 months.
Village, which remains in talks with BGH Capital on a potential $468 million takeover, has been locked in negotiations with its lenders and the Queensland Government for months, seeking additional cash to combat the coronavirus downturn.
The company, which has 5000 staff on the Gold Coast, was forced to shut its parks on March 23 and had been bleeding up to $15 million cash each month the parks were shuttered. Movie World and Wet’n’Wild reopened on July 15 and Sea World on June 26.
The company in an ASX statement also said it had been able to reduce its cash burn since reopening the parks.
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It said its net debt position as of June 30 was $280 million and the company had $40 million in cash available.
The new $70 million facility is currently undrawn. Village said $43 million of the new facility is current for 12 months with the balance running for five years.
Village as part of the funding deal has given an undertaking to raise a minimum of $35m via new shareholder equity or equity-like instruments.
This must be completed by the earlier of the half-year results announcement in February or three months after the termination of a transaction with BGH Capital.
The statement also said theme park visitors since the attractions opened at 50 per cent capacity had come mostly from the Queensland market.
Village said work continues on its New Atlantis precinct at Sea World.
It said it continues to exercise “strict controls” over operating expenditure while taking advantage of increasing visitor numbers.
The company yesterday announced its fourth extension to talks with BGH.
Shares closed today down 3c to $2.10.
TAKEOVER TALKS CONTINUE
MARATHON talks between BGH Capital and takeover target Village Roadshow have been extended for a fourth time.
Village announced yesterday that it had granted a one-day extension to talks with the private equity firm to August 6.
This is the fourth extension to the talks first announced on May 18.
The offer on the table is $2.40 per share – well down on the previous BGH $4 per share offer.
BGH’s proposed takeover has attracted criticism from New York-based activist investor Mittleman Investment Management and analysts who say the offer undervalues the company.
The latest announcement on the NSW border closure could throw another spanner into the works if it resulted in any theme park closures.
A Village spokesman said it was closely monitoring the situation in the southern states.
“While it is disappointing that guests from this market will not be able to travel to the Gold Coast, we understand the Government’s approach and will continue to work with them throughout this period,” he said.
“We will continue to focus our marketing efforts on attracting locals and visitors from non-restricted regions to our parks, where they can experience our world-class line-up of rides, shows and attractions.”
Movie World and Wet n Wild reopened on July 15 and Sea World on June 26.
An Ardent Leisure spokeswoman said the company still expected Dreamworld and WhiteWater World to reopen in time for the September school holidays.
The extension to the Village/BGH talks comes as Citi analyst Sam Teeger last week issued a note commenting on what he says is increasing pressure on Village’s cinema business.
Village’s half-year results released in February showed its cinema business provided income of $151.3 million for the six months to December 31 and pretax earnings of $23.5 million.
In the note Mr Teeger warned that an agreement between Comcast and AMC under which Universal’s films will be released on video-on-demand services 17 days after its theatrical release could place extra pressure on cinema operators.
This was because the agreement reduced the theatrical window.
“The AMC Comcast deal highlights increasing structural pressures for cinema exhibitors consistent with our recent research,” Mr Teeger writes.
“While we do not know the share of PVOD (premium video on demand) revenues AMC will receive, we view today’s announcement as a long-term negative for cinema exhibitors including AMC, Cineworld, Event, and Village. We see risk that Event, Village, and Cineworld could be forced into similar unfavourable deals.”
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