BGH Capital to acquire Village Roadshow, with conditions

The final price BGH pays for theme park and cinema firm Village Roadshow depends in part on Queensland’s reopening.

Movie world Photo Annette Dew

After months of speculation and back-and-forward, Village Roadshow says it will be taken over by BGH Capital, but the final price hinges on coronavirus restrictions being lifted on its theme parks and cinemas.

The takeover would value Village Roadshow at up to $478m and offer shareholders up to $2.45 per share - a premium of up to 39 per cent on its shares compared to May 15, before exclusive talks started.

The deal provides two pathways for BGH to take over the company. One option offers a base price of $2.20 per share, with an additional 25c per share contingent on a loosening of coronavirus restrictions that would increase business. A second option offers a base price of $2.10 per share.

The full consideration of up to $2.45 is contingent on the reopening of theme parks and cinemas and Queensland borders being open to visitors from New South Wales and Victoria.

In a breakdown of the offer, BGH is offering an additional $12c a share if Village’s flagship Gold Coast-based Warner Brothers Movie World and Sea World parks are open for five business days leading up to two days before the proxy cut-off date.

Currently the parks are operating at 50 per cent capacity due to government regulations.

A further 8c a share will be offered if “a majority of the cinema business locations are open to the public” within that same time period.

Village Roadshow operates 58 cinemas across the country in a joint venture partner Event Hospitality and Entertainment, but the terms of the deal define a majority of cinemas as the locations that represented 75 per cent of business revenue in 2019.

Lastly, an additional 5c a share will be offered if Queensland opens its borders to NSW residents by October 15 and to Victorians by October 31.

Chairman of the independent committee of Village Roadshow‘s board of directors, Peter Tonagh, said the deal represented many months of hard work as the pandemic caused a “significant change” in Village Roadshow’s “financial position and trading environment”.

“The BGH transaction provides the opportunity for all VRL (Village) shareholders to realise an attractive cash price for all of their VRL shares, in a very uncertain operating environment,” he said.

“VRL shareholders will also have the opportunity to elect to retain an equity interest in an unlisted VRL entity that is controlled by BGH.

“It is our view that the BGH Transaction will realise attractive value for all shareholders.”

The company said a shareholder vote on the deal is due in November.

Village Roadshow’s theme park and movie theatre assets have been under considerable pressure as governments implement lockdowns in response to the pandemic.

Australian box office receipts have plunged from $35.9m in March to just $3.51m by the end of June.

Also of consequence, as revealed by The Australian, are the looming implications of a deal Universal Studios struck with cinema chain AMC, under which movies are exclusively shown on big screens for just 17 days before going to streaming services, instead of 75 days previously.

On Thursday Village Roadshow said it had secured $70m in support from its lenders and the Queensland Treasury Corporation and would tap shareholders for $35 million by February.

Village Roadshow opened flat on Friday at $2.10 a share, giving it a market capitalisation of just over $410m.