Nine Entertainment eyes Village Roadshow assets

There are suggestions Nine may be interested in Village Roadshow’s film distribution business.

Difficult trading conditions and an almost non-existent advertising market right now don’t seem to be stopping media companies from weighing up potential opportunities and some think Nine Entertainment could be doing just that.

One suggestion in the market is that the Australian listed free-to-air broadcaster and publisher of titles including The Sydney Morning Herald, The Age and The Australian Financial Review could be looking at assets within Village Roadshow.

Village has a market value worth almost $381m and $198.4m worth of net debt at December.

Nine is not thought to be making a bid for the business, yet some in the market believe any interest it may have would likely be on a portfolio break-up.

This could be where private equity takes out the theme park assets such as the Gold Coast-based Sea World, and Nine takes its cinema distribution business.

Potentially its cinema assets could be on its agenda, although many in the market believe this is less likely.

While the Village Roadshow film distribution operations may only be small, perhaps worth about $20m, they are likely to have significant value for Nine, given the content library.

For the six months to December, Film Distribution generated $400,000 of earnings before interest, tax, depreciation and amortisation.

In particular, the division would likely be a valuable bolt-on acquisition for its streaming service STAN, transforming the business also into a production house.

The film distribution arm, which started operating under the Roadshow brand in 1970, in August became a subsidiary of Village Roadshow, distributing movies to cinema, pay television and free to air television in Australia and New Zealand.

A sale of that part of the business could be a way to get some cash through the door.

While media companies are currently looking at potential deals, many are sceptical that they will follow through on transactions because all are currently trying to preserve cash amid the tough COVID-19 disruptions.

Still, it makes sense that Nine could be running the ruler over Village assets for when better times return.

The COVID-19 crisis has forced Village to close its theme parks and cinemas and is not generating income.

Earlier, private equity funds BGH Capital and Pacific Equity Partners put forward indicative offers for the business that valued the company at between $750m and $800m.

BGH trumped an earlier offer by PEP with a $4 per share bid, yet both have not returned with firm proposals.

Some say that Nine may have an appetite for more than cinema distribution, given that the advertising model would be attractive and would create another distribution point for content and audience.

The cinemas could be used for various purposes, including screening the release of new shows and major sporting finals.

Chief executive Hugh Marks is understood to have put mergers and acquisitions off the agenda at the start of this year due a weak advertising market.

Any interest in acquisitions before that was on metropolitan markets and entertainment.

Nine had earlier sold its events business, but it was considered by some analysts to be substandard.