Village Roadshow faces a break-up by private equity

Theme parks are typically owned by private equity funds globally. Picture: Annette Dew

Private equity suitors for Village Roadshow are expected to break up the company if they are successful in an acquisition, according to some industry experts.

However, they also question whether a takeover will be completed, with some suggesting that the original family owners backing the group would continue to seek hands-on involvement, which may not be to the private equity firms’ liking.

Last year, Pacific Equity Partners bid $3.90 per share for Village Roadshow, while its rival, BGH Capital, later offered $4 per share for the company, and both were offered due diligence.

It appears the market could also be betting that a deal won’t proceed, with shares in the target closing below the bid offers at $3.48 on Wednesday.

The company’s value fell after the group delivered a $26m loss last month due to impairments on its film distribution operations. The impact of coronavirus also weighs on the company’s value, now $694m.

PEP is working with Highbury Partnership as its adviser and using Jefferies to fund its offer, while DataRoom can reveal that BGH Capital is working with Goldman Sachs on its bid, rather than Macquarie Capital as first thought.

Village Roadshow is advised by UBS.

Some believe that BGH and PEP could retain the theme park operations of Village Roadshow, which includes the Gold Coast parks SeaWorld, Movie World and Wet ’n’ Wild, and sell off the cinema and film production assets.

One of the incentives for BGH to wade into the contest could be that like the buyout fund, the company is also Melbourne-based.

A logical scenario involves the Kirby family retaining the film distribution business and offering private equity the remaining operations.

Robert and John Kirby own 42 per cent of Village Roadshow, along with former chief executive Grahame Burke.

Theme parks are typically owned by private equity funds globally, but the thinking among some is that the cinema side of the business is better in the hands of a trade player.

PEP has a call option over a 19 per cent interest in the stake backed by the Kirbys as part of its cash and scrip bid, which could see the family take an interest in the delisted company should it be acquired by PEP.

Currently, the listed entity is run by executive chairman Robert Kirby’s son, Clark, taking over from Mr Burke, who has worked with the company’s founder, Roc Kirby, since the age of 14.

The Kirbys and Mr Burke have all been directors of the listed group.