Village flags BGH Capital takeover deal

Theme park operator Village Roadshow says it has received a new takeover offer from BGH Capital.

An artist impression of The Vortex ride at Sea World's The New Atlantis. Picture: 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, with local private equity heavyweight BGH Capital striking a deal to take over the battered company.

The deal values the company at just $2.40 per share - a bargain as the company had been in play for about $4 per share before the coronavirus struck and its theme parks and cinemas were shut down.

The plan would see the founding Kirby family effectively join with Melbourne-based BGH to privatise the company, keeping the family in control of the entertainment empire which they set up, and which they hope to restore to its former glory when the economy reopens.

The Kirbys will remain as significant, committed shareholders in the privatised business and family scion Clark Kirby will remain as chief executive with Robert Kirby as executive chairman.

Village shares leapt to $2.10 in morning trade and were up by 12.7 per cent to $1.99 at 11am.

BGH Capital has proposed a scheme of arrangement it said represented a total value of up to $2.40 per share, with Village saying it had entered into a deed under which the private equity company would be provided with the opportunity to undertake due diligence and negotiate transaction documentation over a four week period on an exclusive basis.

The offer price of up to $2.40 per share consists of a base offer price of $2.20 per share plus an additional 12c per share in the event that Warner Bros. Movie World and Sea World have reopened to the public three business days prior to the day Village shareholders meet and vote on the privatisation transaction.

Another 8c per share would be added to the price in the event that a majority of the cinemas business locations - representing three-quarters of cinemas business revenue - have reopened in the same period.

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

Under the BGH deal two transaction structures have been proposed to effect the takeover.
The first would see a newly incorporated company controlled by BGH acquiring the shares in the private VRC's ultimate holding company from John Kirby, Robert Kirby and Graham Burke, that accounts for about 40 per cent of the register, then VRC acquiring all Village shares held directly by VRC shareholders and those held by other shareholders via a scheme of arrangement.

The VRC shareholders would receive consideration comprising shares in the unlisted bid company and a proportion of cash. Non-VRC shareholders would have the option to receive all cash or to receive some of the consideration as shares in the unlisted company, subject to some limits.

The second structure would involve a bid company acquiring all of the shares in Village via a scheme of arrangement. All shareholders would have the option to receive all cash or to receive some of the consideration as shares in the unlisted company.

BGH intends that the second structure would be proposed simultaneously with the first plan, and would be considered by shareholders if the first scheme did not secure shareholder approval.

The base offer price under the second structure would be $2.10 per share.

The privatisation hinges whether independent shareholders support the scheme and there is no further material deterioration in the operating environment or outlook for Village. BGH has four weeks exclusive due diligence and there is a break fee of $4.29m.
Village's independent directors said they had "carefully considered" the proposals received, as well as the significant change in the company's position and trading environment since last December, when it first received a rival proposal from Pacific Equity Partners and in January, when it received an earlier proposal from BGH.

UBS and Stratford Advisory Group are acting as financial advisers and MinterEllison as legal adviser to Village.

Village earlier said it was in advanced discussions with its lenders to increase its debt levels, as ongoing closures of its parks and cinemas hits its balance sheet.

The owner of the Gold Coast’s Movie World, Sea World and Wet’n’Wild, among other leisure parks, says its 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, and the company expects a net debt position of about $315m by June 30.