Village Roadshow extends BGH Capital’s due diligence

The proposal values Village at just $2.40 a share, much less than the $4 a share in play before coronavirus struck.

The Ben Gray-backed proposal values Village at just $2.40 a share. Picture: Annette Dew

Village Roadshow has granted private equity company BGH Capital more time to undertake due diligence on its operations as part of the $468.5m takeover proposal it laid out last month.

Village said a process deed with BGH had been amended, with the initial four-week period extended by two weeks to June 30, and a further two-week available extension if the parties continued to actively pursue the potential transaction.

The time extension for BGH was put down partly to the delays that are still affecting takeovers as lawyers and accountants gradually return to work.

BGH has also had a busy period in which it bid unsuccessfully for Virgin and more recently made a successful $500m play for medical centres division of Healius.

The time extension could also provide a window into how cinemas will fare in the wake of the virus as operators, including Village and rival Event Entertainment and Hospitality, ready to reopen in July.

If the deal goes ahead the theme park and cinema operator is set to become one of the highest-profile corporate takeovers in the wake of the coronavirus crisis.

The Ben Gray-backed proposal values Village at up to $2.40 per share — a relative bargain, as the company had been in play for $4 per share before the virus struck, throwing the leisure sector into chaos and shutting down theme parks and cinemas.

BGH’s offer could also be sweetened from its base $2.20 per share, with an another 20c per share to be paid if Warner Bros Movie World, Wet ‘n’ Wild, Sea World and most cinemas have reopened three business days ahead the deal being voted upon.

If realised, the takeover plan would effectively see the founding Kirby family effectively join with Melbourne-based BGH to privatise the company, with the family staying at the helm of the entertainment empire even though the private equity fund would have a majority stake.

But US activist investor Mittleman Brothers last month struck a blow to BGH’s plan, labelling its takeover proposal opportunistic and criticising it for taking advantage of the coronavirus crisis.

Long Island-based Mittleman Brothers chief investment officer Chris Mittleman labelled BGH’s takeover play as blatantly opportunistic, adding it was a “shameful act” under the circumstances.

Mittleman Brothers, which has lifted its stake from just over 5 per cent of the register to 6.37 per cent, had said it was greatly concerned that the leisure company’s board had determined to engage with BGH but sources said this was not enough to block the deal.

Village shares closed up 1c, or 0.5 per cent at $2.18 on Tuesday, against a 3.9 per cent rise in the benchmark index.