BGH Capital is believed to be pressing on with its $479m acquisition plans for Village Roadshow despite the company’s announcement this week that it had lost its Warner Brothers film distribution contract.
The company’s confirmation that Warner Brothers will not renew its contract with Village Roadshow to distribute its films to Australian and New Zealand cinemas when it expires on December 31 was understood to be a surprise to BGH.
Still, it is believed to be keen to persevere with its acquisition of the business, with shareholders to vote on the transaction on November 26.
The draft scheme of arrangement booklet has been lodged with ASIC for its statutory review and a Federal Court hearing to move forward with the transaction is scheduled for October 9, with December 16 being the date when the acquisition is set to be finalised.
The Warner Bros decision is expected to create a hit of less than $5m to the company’s annual earnings before interest, tax, depreciation and amortisation, which last financial year were $82.9m.
The relationship between Warner Bros and Village Roadshow owners, Graham Burke and the Kirby family, spans 50 years, but it has come to an end after Warner was bought by AT&T in 2018.
Since that time, Warner has reached a deal for Universal to distribute its film content in 10 different global markets, including Australia.
This comes as the industry globally experiences consolidation.
The situation has led some to question what BGH does next with the Village film distribution operations, with some suggesting a sale of that operation to Madman Entertainment makes sense for the private equity firm.
Madman is the largest independent distributor of film content in Australia and it is thought Madman would be a keen buyer of the assets.
Analysts believe the real attraction for BGH Capital to Village Roadshow is the high cashflow-generative theme park arm, which includes Sea World, Warner Bros Movie World and Wet ’n’ Wild.
Some believe BGH would be open to a sale of the Village cinema and film distribution operations, which accounts for a far smaller portion of its overall earnings.
Outside its historical relationship with Warner Bros, Village Roadshow has been Australia’s largest independent film distributor and will continue to distribute films produced by independent suppliers, including FilmNation, Village Roadshow Pictures, STX and others.
Also to expire in December is the Warner Bros contract for Village Roadshow to distribute home entertainment, but the entertainment conglomerate is yet to make a decision on this contract.
Village Roadshow’s long-term licence to operate Warner Bros Movie World on the Gold Coast will not be affected.
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