BGH lobs ‘bargain’ bid for battered Village Roadshow

Theme park operator Village Roadshow is set to become one of the highest-profile corporate takeovers in the wake of the coronavirus crisis

Village Roadshow owns Warner Bros. Movie World. Picture: AAP

Theme park operator Village Roadshow is set to become one of the highest-profile corporate takeovers in the wake of the coronavirus crisis, with Virgin bidder BGH Capital lobbing a deal worth up to $468.5m for the battered company.

The Ben Gray-backed proposal values Village at just $2.40 per share — a bargain, as the company had been in play for $4 per share before the virus struck, throwing the leisure sector into chaos and shutting down theme parks and cinemas.

If realised, the takeover plan would see the founding Kirby family effectively join with Melbourne-based BGH to privatise the company, with the family staying at the helm of the entertainment empire even though the private equity fund would have a majority stake.

The Kirby family and former Village chief Graham Burke hold about 40 per cent of the register via the private VRC, and under the plan would remain significant shareholders in the privatised business, with family scion Clark Kirby chief executive and Robert Kirby executive chairman.

The pair would hope to restore Village to its former glory when the economy reopens.

Despite the offer being a far cry from BGH’s pre-crisis proposal at about $770m, Village shares jumped by 20.7 per cent to close at $2.13.

Private equity firm BGH is emerging as a very active player in the post-crisis turmoil. It is also a short-listed bidder for Virgin Australia.

One analyst dubbed the pricing of the Village bid as “very opportunistic” and argued the company’s leisure assets were unique, saying their value was probably much higher than BGH’s price.

The fate of the bid hinges on the response of the 60 per cent of the register not held by the founding Kirby family.

“It all depends on whether the institutions are prepared to accept a cash gift in this market,” the analyst said.

Industry players also suggested that another suitor, private equity company PEP, could come back to the table.

BGH’s deal is structured as a scheme of arrangement that represents a total value of up to $2.40 per share. It has been granted exclusive due diligence for four weeks.

There is a base offer price of $2.20 per share plus 12c per share if Warner Bros. Movie World and Sea World reopened three business days before Village shareholders voting on the privatisation. Another 8c per share would be added if most cinema locations also reopened in the same period.

The period for a vote is expected to be drawn out until later this year and it is not known when the company’s Gold Coast-based parks will reopen.

On Monday, Queensland’s chief health officer Dr Jeannette Young said Queensland would not be opening the border before July, although Premier Annastacia Palaszczuk earmarked September as a more realistic date.

The proposed deal is at a 25-36 per cent premium to Village’s closing price of $1.765 last Friday and a 51-64 per cent premium to the $1.46 volume weighted average price from March 19, when the crisis struck.

Two structures have been proposed to effect the takeover.

The first would see a new company controlled by BGH acquiring the shares in the private VRC’s ultimate holding company from John Kirby, Robert Kirby and Graham Burke, which accounts for about 40 per cent of the register.

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VRC would then acquire all Village shares via a scheme of arrangement and the trio would receive cash and shares in the new unlisted company. Other shareholders could also choose to receive a mix of cash and unlisted shares.

The second structure would see a BGH bid company acquiring all of the shares in Village via a scheme of arrangement, with investors to receive a mix of cash and unlisted shares. The base offer price under the second structure would be $2.10 per share.

Village’s independent directors said they had “carefully considered” the proposals it received, as well as the significant change in the company’s position and trading environment since last December, when it first received a $3.90 proposal from Pacific Equity Partners and since January, when it received a $4 proposal from BGH.

Village is also in advanced discussions with its lenders to increase its debt levels, as ongoing closures of its parks and cinemas hit its balance sheet.

The company said it was burning through between $10m and $15m a month, with operating costs to increase as it prepares for its venues to reopen.

At April 30, Village Roadshow had undrawn debt facilities of $5m.