BGH Capital lifts takeover offer for Village Roadshow

Private equity raider BGH Capital has been forced to fork out more to take over entertainment company Village Roadshow.

Village Roadshow is expected to come out of a trading halt with an offer from BGH Capital worth about $586m. Picture: Village Roadshow Theme Parks

Private equity raider BGH Capital has been forced to fork out more to take over entertainment company Village Roadshow in the face of a strident campaign led by two dissident investors.

The listed theme park and cinema company is expected to come out of a trading halt with an offer from BGH Capital worth about $586m — or $3 a share — a jump on a low-ball scheme worth $2.22 the private equity company had proposed.

Even at $3 the price is likely to draw opposition from US investor Mittleman Brothers, which owns 14.34 per cent of Village, and had threatened to block two schemes put up by BGH. It is, however, likely to be enough for local firm Spheria Asset Management, that has a 7.8 per cent stake, which has hardened its position this week against the schemes.

Spheria portfolio manager Matthew Booker said investors would be receiving certainty if an offer was made around $3, whereas Village would have to raise equity next year if the BGH bid was rejected.

“We don’t know what the bounce-back will be like,” he said, in a nod to uncertainty produced by the pandemic. Spheria believes Village’s assets are appealing but is cautious about its track record in managing them.

US-based Mittleman, in particular, has been a savage critic of the BGH bid, accusing the private equity firm of seeking to capitalise on the coronavirus crisis by trying to scoop up Village while its operations are at their weakest.

Mittleman Brothers chief investment officer Christopher Mittleman said he disagreed with Spheria’s assessment of a BGH bid of about $3. He said the boost was a mere $147m extra and remains “simply unacceptable” as it would be an earnings multiple of about 6.25 once the company was back on track in 2022.

“It is not even remotely fair, and it may in fact be unprecedented,” he said. “What theme park company ever went private at such a multiple?”

Mr Mittleman appears to be hoping his position on the register will give him some sway, saying he hoped Spheria did not “cave in” to BGH anywhere around $3 per share, although he acknowledged the investors may have different time horizons, liquidity needs, or views on risk and reward.

In a complex approach BGH Capital had proposed two schemes, one worth $2.32 per share and the other worth $2.22 per share.

The schemes would see the private equity house take the company private alongside the founding Kirby family, who along with former chief executive Graham Burke control about 40 per cent of the company.

BGH had been reluctant to boost the bid, partly due to uncertainty about the shape of the recovery from the coronavirus pandemic, and it had also won the support of the UBS-advised independent board committee and independent expert Grant Samuel.