Sale saga continues for Village Roadshow

The end of Village Roadshow’s life as a public company has just about all the elements of a Hollywood thriller — and it is not over yet.

Village Roadshow CEO Clark Kirby at Movie World on the Gold Coast. Picture: Adam Head

The end of Village Roadshow’s life as a public company has just about all the elements of a Hollywood thriller — and it is not over yet.

Just this year it has featured a pandemic-driven share crash. A private equity saviour. A once divided founding family united by the prospect of a $478m deal. And a US hedge fund dubbed either a villain or a protector of investor interests.

The tale of real-life brothers John and Robert Kirby, who worked for decades with family patriarch the late Roc Kirby and star chief executive Graham Burke, stole headlines last year as Village Roadshow groped for its future.

The company had lurched into crisis but righted the ship by selling off unwanted divisions and handing the reins to the next generation of the family, with theme park boss Clark Kirby stepping up to run the company.

The idea was to take it private with local powerhouse Pacific Equity Partners and put the famed theme parks and cinemas back on the entertainment map.

That deal valuing Village at $3.90 per share was trumped by a $4 per share offer made by BGH in late January, valuing the company at about $770m.

But then the virus struck, freezing the industry and talks before BGH returned with a cut-price offer worth up to $2.40 per share in March.

While Village has been able to get a 5c lift, subject to theme parks and cinemas getting back to normal and borders reopening, and BGH is well-positioned as it has the backing of the target’s independent directors, in the absence of a better offer, the deal is yet to close.

For one, PEP could storm back for the prize that BGH stole from its grasp.

Second, there is US hedge fund Mittleman Brothers, which has built an 8.5 per cent stake in Village and could have enough influence to see two schemes proposed by BGH fail.

The founding Kirby family and Mr Burke have committed their 42 per cent stakes to taking the firm private. They will be hoping for a revival in cinema as viewers hanker for a new era of escapist entertainment, and for local theme parks rise again as international travel is blocked. But the US group argues listed shareholders should also benefit.

Chief investment officer Christopher Mittleman argues that minority investors have every right to participate in the rebound, fully, and not have their share of the upside “forcibly divvied up between a private equity firm and the controlling shareholders”.

The seasoned investment manager also rejects a colourful characterisation of his expectation of fairness in the investment battle to be villainous. But it could come down to a tight vote at a planned November meeting.

Morningstar equities analyst Brian Han says that in “ordinary circumstances” the BGH offer would be “nowhere near enough”.

“But we’re not in a normal environment at the moment,” he said.

Mr Han said that while Village could be worth more, a return to normality could be prolonged and the company’s balance sheet was getting stretched.

He dubbed the bid a classic opportunistic play by a private equity firm, which had the backing to support the investment through lean times. The critical question was how much of the eventual upside the private equity firm planned on keeping themselves.