BGH declares Village bid prices final but shares waver

Village Roadshow could be taken off the ASX if BGH Capital succeeds in taking it private, but investors don’t believe it is a done deal.

Mittleman Investment Management believes that Village’s theme parks are worth just over $1 billion. Picture: Supplied

The long-running takeover battle for Village Roadshow has come to a head, days before a meeting to vote for schemes proposed by private equity suitor BGH Capital valuing the famed company at up to $586m.

The Melbourne-based firm has declared its offer for the theme park and cinema operator final after last month sweetening it to up to $3 per share in the face of two major shareholders baulking at its initial low ball bid.

But Village shares dipped up 3c to $2.87 in early Friday trade as investors still hold doubts as to whether the deal will succeed, despite it being backed by its independent directors, major proxy advisers and it sitting above independent expert Grant Samuel’s valuation of $2.03 to $2.80 per share.

BGH’s sweetened bid won the support of local funds house Spheria Asset Management and the takeover’s prospects now lie in the hands of US investor Mittleman Investment Management, which has a stake of more than 15 per cent, and has argued against such a low valuation for the company.

The US house may have the sway on the register to defeat one proposed scheme at $3 per share, but it may be unable to prevent a second scheme, in which the founding Kirby family and veteran former chief executive Graham Burke can vote their 40.4 per cent stakes, going through at $2.95 per share.

Village on Friday confirmed that BGH had written to it and said the prices it had offered under the two schemes were final. But the stance of dissident US-based Mittleman may be the difference in not only the final pricing but whether either succeeds.

The US company has claimed Village’s theme parks, including Queensland’s Sea World and Warner Bros. Movie World, will be worth just over $1bn and its movie theatres worth $480m once the pandemic lifts.

It last month issued a call for other investors to oppose the deal on the basis it dramatically undervalued the iconic Australian company, arguing there was no need to sell in a crisis before the economy recovers.

“We presume pre-pandemic economics and pre-pandemic valuations should be attainable, at the very least. In fact, we think better than pre-pandemic financial results are likely attainable in the near-term based on pent-up demand,” Mittleman said in a lengthy presentation.

The US house also fired at the once-split but now united founding Kirby family, which is supporting the sweetened BGH takeover plan, arguing Village had adopted “disingenuous pessimism” in dealing with the takeover, rather than the “contagious optimism” that legendary founder Roc Kirby had infused in the company.

BGH last month lobbed a sweetened takeover deal of $3 per share, valuing Village at about $900m including debt, and has the backing of Spheria, which holds a stake of 7.8 per cent, for both schemes.

Mittleman previously rejected the prospect of bids around this level, saying Village was worth more than $5 per share. The company is yet to reveal how it will vote but upped the ante by lifting its overall holdings from 14.34 per cent to 15.1 per cent last month.

Village was in play before the pandemic struck, when BGH was circling at $4 per share. But the company’s theme parks were hit hard and its cinemas are now under more immediate threat from streaming services. Its debt could soar to $380m by next June.
Village lead independent director, former Foxtel chief Peter Tonagh, has said the BGH transaction was the best option available and represented significant value for Village shareholders compared to any alternatives, including the status quo.