westical

Pacific Equity Partners in talks to acquire Village Roadshow

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For those hitting a paywall

 

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Homegrown private equity firm Pacific Equity Partners is in talks to acquire diversified entertainment business Village Roadshow in a deal worth as much as $1 billion.

Street Talk understands the price being negotiated is about $3.90 a share, a 31 per cent premium to the three-month volume weighted average price. Village Roadshow's shares last closed at $3.20.

The deal would be worth as much as $1 billion, including debt.

It is understood boutique M&A adviser Highbury Partnership and Clayton Utz are advising PEP. MinterEllison is advising Village Roadshow.

PEP dealmakers David Brown and Shannon Wolfers are running point on the mooted public to private transaction, sources said.

Village Roadshow went into a trading halt on Thursday morning.

"The trading halt is requested to allow the company to provide information about a potential corporate control transaction," its release to the ASX said.

Village Roadshow is a diversified entertainment business with theme parks and cinemas.

Street Talk understands the $625 million business has been the subject of a few approaches in the last 12 months but PEP is the first party to have its offer taken to the board room.

It is understood the sustained agitation has led the Kirby brothers - who sit on the board - to be open to cashing out.

PEP has form in the media space. It was the owner of cinema chain Hoyts for almost a decade and doubled its earnings over this period.

PEP invested more than $100 million in digitisation initiatives, including ticketing and moving Hoyts screens from film to digital projectors. PEP also invested in refurbishments and new sites as it sought to re-configure the business.

It sold the business to Dalian Wanda in 2015 for an undisclosed amount, understood to be about $900 million.

In the last decade, the private equity firm has completed five public to private transactions, including the acquisition of Patties Foods in 2016.

 

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On 16/01/2020 at 8:04 AM, westical said:

All private equity firms too so naturally even more extensive theme park experience. 

We should all be hopeful that the small amount of large scale themed entertainment operators out there might consider taking the entire Village business private... 

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8 hours ago, S.W24 said:

We should all be hopeful that the small amount of large scale themed entertainment operators out there might consider taking the entire Village business private... 

I might be alone on that one but that's not always a good thing for the business to be in the hands of a small number of people in the private sector, especially in such an area. Very easy to manipulate the prices without any real competition from the outside.

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Sounds like it is good for the business. Just maybe not for customers who want to pay less. 

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A new player has entered the race.

 

Village Roadshow said that it has received an unsolicited, non-binding indicative proposal from BGH Capital.

BGH has offered to acquire all of the shares of Village Roadshow via a scheme of arrangement at $4 a share.

That price is a 25 per cent premium to Village Roadshow’s share price of $3.20 on 18 December, which was the last trading day before Pacific Equity Partners made a proposal, Village Roadshow said.

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And further from GCB...

 

BGH Capital lobs new offer for Gold Coast theme park operator Village Roadshow

Gold Coast theme park operator Village Roadshow has revealed it has entered into exclusive due diligence talks with a private equity firm about a possible buyout.

PRIVATE equity firm BGH Capital has entered into exclusive due diligence with Gold Coast theme park operator Village Roadshow to buy the company.

BGH previously launched a takeover offer for the listed Village Roadshow in January this year, offering $4 cash per share and valuing the Movie World owner at $780 million.

A lot has changed since that offer with the shutdown of the company’s theme parks and cinemas leading to a slump in revenue and the share price, which hit a low of 77c before bouncing back to above $2.

Village said this morning it has entered into a transaction process deed where BGH will be given four weeks to undertake due diligence with a view to reaching a deal to acquire all the Village shares in a scheme of arrangement worth $2.40 per share.

That is $1.60 less per share than the previous offer and reflects the change in the share price owing to the COVID-19 shutdown.

The proposal is subject to a range of conditions including “no further material deterioration in the operating environment or outlook for VRL”.

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From an enthusiast point of view is this a good thing? Bad thing? Village Roadshow have been affiliated with the parks for so long it's a huge change.

 

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2 hours ago, westical said:

http://www.afr.com/street-talk/village-roadshow-s-never-ending-story-almost-done-20200726-p55fj9

AFR reporting that BGH & VR will sign off on the takeover today, although major shareholder Mittleman Brothers may try and block it. 

Any chance you can post the article here? It’s behind a paywall 

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34 minutes ago, Brad2912 said:

Any chance you can post the article here? It’s behind a paywall 

Fair use?

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Village Roadshow’s never ending story almost done

Every good movie needs a cliffhanger or two, so it’s no surprise that the battle for Village Roadshow is heading for another such moment.

Exclusivity for takeover bidder BGH Capital officially ends today. And while the deadline is not such a big issue – the exclusivity period has been extended a number of times throughout this process and will be again – it is understood the deal is right on the edge of completion.

BGH got close to wrapping things up yesterday, and is expected to sign on the dotted line in the coming days, sources said.

That could bring to an end an epic story that is, at its heart, the tale of a fallen star with family problems.

And Street Talk found a good sign a deal would come to fruition when we were trawling through lodged ASIC documents at the weekend – as you do – and stumbled across a new holding company that counts BGH dealmakers Ben Gray, Simon Harle and Matthew Claughton as its three directors.

The company’s name?

VRG Holdco Limited, which is no doubt a new holding company to house Village Roadshow.

So while a revised scheme arrangement was a week away at most, BGH was getting prepared.

BGH and Village have been in exclusive discussions since mid-May, when the private equity outfit lobbed a $2.40 non-binding proposal at Village’s board. BGH had put a $4.00 a share bid to the company in January before COVID-19 struck and revenue from Village’s theme parks and cinemas ground to a halt.

However, even with a new scheme in sight, a thorn in any deal getting away is Village shareholder Mittleman Brothers.

The major shareholder and New York-based fund manager wants a bit of extra screentime and has expressed that it thinks BGH’s latest $2.40 offer is too low and it wants to see BGH pay $5.

The shareholder said a sale at $2.40-a-share offer would be ‘‘a shameful act’’ back in May.

Mittleman has been building a blocking stake in Village and revealed earlier this month that it now held 8.5 per cent of the share register. This shapes Mittleman up as the largest independent shareholder, which could have significant sway on the deal.

 

One week extension has since been announced by VRL to the ASX -

Quote

Village Roadshow Limited (ASX: VRL) (“VRL”) today announced that it has extended by one week the exclusivity period for its discussions with BGH Capital Pty Ltd ("BGH").
The Transaction Process Deed with BGH has been amended, with a one week extension to 4 August 2020.
VRL will continue to keep the market informed of any material developments in accordance with its continuous disclosure requirements.

 

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Quote

 

MOVIE World owner Village Roadshow could be in new hands by November if shareholders approve the BGH takeover offer valuing the company at $758 million.

Village announced this morning following months of negotiations with BGH Capital that it had entered into an agreement for the private equity firm to acquire a controlling interest in the theme park operator.

Shareholders are being offered up to $2.45 per share, which is partially contingent on the reopening of Village’s theme parks and cinemas and Queensland’s borders being open to visitors from NSW and Victoria.

A shareholder vote is expected to be held by November.

The border with NSW and ACT will be closed tomorrow, which could present a problem for the deal being implemented.

New York-based activist investor Mittleman Investment Management, which has a significant stake in the company, is also on record being opposed to the deal, which it considers undervalues the company.

The Village board unanimously recommended the proposal, which if approved would result in directors including Robert Kirby and John Kirby retaining a stake in the new unlisted BGH company controlling Village.

Clark Kirby remains CEO under the proposal.

Peter Tonagh, who heads up the board’s independent committee, said the offer is in the best interests of shareholders, representing an opportunity to realise an attractive price for their shares in an uncertain operating environment.

 

https://www.goldcoastbulletin.com.au/business/gold-coast-theme-park-owner-village-roadshow-close-to-finalising-deal-with-bgh-capital/news-story/e641f79673a6806dba008d549e2b794c

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15 minutes ago, Brad2912 said:

Peter Tonagh, who heads up the board’s independent committee, said the offer is in the best interests of shareholders, representing an opportunity to realise an attractive price for their shares in an uncertain operating environment.

Wouldn't shareholders be better off to wait for a rebound then literally selling them at the worst possible time?

I've had shares drop at the moment but im certainly not panicking and unloading them.

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Problem is the recovery is unknown. The 100 million capital they have just generated to help them through this period doesnt account for anything getting worse or factor in how long it will take to reach pre covid levels. Its just for immediate running expenses through into next year. That could mean regular injection of substancial capital over the 2-3 years AFTER state and nternational borders are open and people are allowed to travel freely anywhere. You could be faced with a 4 or 5 year return plan, which could basically make the company insolvent if left unchecked and recovery is slow. The 350 million debt turns into 500 quickly and could reach 600 or more to complete planned works. The company values continue to drop and suddenly your ability to generate more captial dries up and your stuck in a situation that dreamworld are. 

They wouldnt let it get that far, so it means years of thinning costs and reducing expenditure, likely throwing your plans for new rides and attractions in the bin. Its kind of the opposite of everything you want to be doing to recover from the complete unknown that is covid.

BGH have capital to inject without needing to seek financing, so its a good situation for the company vs taking on more debt and trying to trade out of it. It could be another decade before you see that money paid down just to get back to pre dreamworld incident debt levels.

Edited by Levithian

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