BGH Capital to bring curtain down on Village takeover deal

The chances of a $468.5m takeover deal getting done are rising with the founding family backing private equity firm BGH and the Queensland government backing its theme parks.

Dissident US shareholder Mittleman Brothers has lashed the sale of Village and it has a stake of about 8.5 per cent, which could influence the deal’s chances. Photo Annette Dew

Private equity powerhouse BGH Capital is looking to seal a long-running deal to take over the iconic Village Roadshow operation after tying up a crucial slice of the register as it attempts to secure its $468.5m bid.

The Melbourne-based company has tied up a block of shares controlled by the Kirby family and former chief Graham Burke that accounts for about 40 per cent of the company.

Their connection was announced via a substantial shareholder notice filed by BGH, but industry players that rival suitor PEP may still be circling after showing interest last year.

The BGH bid has been in the wings for months with its exclusivity locked in as it set terms that included bonuses if Village’s theme parks and cinemas opened before a shareholder vote on its future. The bid was initially pitched at $2.40 a share, but as the coronavirus crisis has slammed its movies and theme park business this is expected to come in closer to $2.20 a share.

Dissident US shareholder Mittleman Brothers has lashed the sale of Village and it has a stake of about 8.5 per cent, which could influence the deal’s chances.

The takeover has been sweetened already as the company revealed it has secured funding of $70m from its existing lenders and the Queensland government, which is keen to keep its theme parks running to protect jobs.

As part of the deal Village has given an undertaking to raise at least $35m via new shareholder equity or equity-like instruments. This must be completed by the company’s half year announcement in February 2021 or three months after the termination of a transaction with BGH Capital.

Village said the additional debt facility would be enough to fund its cash needs for the next 12 months. The forecast is based on the existing trading environment and subject to change, in particular if there are changes in COVID rules.

COVID protocols have slashed entry numbers to half the capacity for each major theme park. Cinemas across Victoria are closed in line with strict Victorian government rules.

The company is using the JobKeeper scheme to keep its workforce in place and redeployed some to Queensland re-openings.

Village has trimmed previous monthly net cash costs of negative $10m-$15m but is still operating on a negative cash basis, which it expects will continue for several months.

Village shares fell by 1.4 per cent to $2.10.