A second, lower offer for Village Roadshow from private equity group, BGH Capital has seen a sharp rise in the value of the shares but remains well under the levels seen in BGH’s first offer back in January.
This second offer is in fact quite complex – there’s a base price of $2.20 a share, against the $4 cash offer in January and the $3.90 a share offer from rival private equity group PEP in mid-December.
The latest offer can rise to $2.40 a share if certain conditions are met, such as the re-opening of Village’s theme parks and cinemas, while the actual offer itself consists of two strands.
The total $2.40 per share offer price is a 36% premium on Village’s $1.76 closing price on Friday.
If the caveats are not met, the offer’s value would drop to $430 million.
Village shares jumped to close up 20% to $2.13.
That complexity might, in the end, prove too much for some shareholders, but company management and insiders want a deal to happen because they have pledged to work closely to make it happen.
BGH now has a period of due diligence on Village before the bid can be hardened into an offer or offers that can be put to shareholders.
Village will then conduct exclusive negotiations with BGH on the offer of which values Village at up to $468.5 million which is significantly lower than the firm’s $770 million bid.
Village’s shares have dropped more than 50% (up to last Friday) since January, which would normally justify the lower offer price.
BGH’s proposes a base offer of $2.20 a share, with an additional offer price of 12 cents a share if Village’s Warner Bros Movie World and Seaworld parks have reopened to the public three business days prior to the day Village shareholders approve the transaction.
BGH has also proposed two separate share acquisition structures, each of which will be considered simultaneously by shareholders.
The first would see BGH acquire the around 40% Village stake owned by the Kirby family and former chief executive Graham Burke, and then purchase the remaining shares via a scheme of arrangement.
The Kirby family and Mr. Burke would receive shares in the new unlisted BGH-controlled company along with some cash, while the rest of the company’s shareholders could choose to receive either cash or some shares and some cash.
The second structure would see BGH acquire all shares from all shareholders in Village in one scheme of arrangement, with all shareholders given an option to receive either cash or a mixture of cash and shares.
The second arrangement would only be considered by shareholders if the first was not approved, and comes in at a lower offer price of $2.10 a share.
BGH’s acquisition proposal is subject to due diligence, FIRB approval, and also for there to be no further material deterioration in Village’s operating environment.
Village said it intended to remain “significant and committed” shareholders in any privatised business, with chief executive Clark Kirby and executive chairman Robert Kirby both intending to remain on board.
The company will now spend four weeks completing due diligence with BGH, though Village warned there was “no certainty the proposal will result in a transaction”.
Village yesterday provided a brief trading update with news of the BGH proposals.
“While its key businesses remain closed, VRL expects its underlying operating cash costs net of JobKeeper subsidy to be between $10-15 million per month,” Village directors said.
“Operating cash costs will increase in preparing for the reopening of its key businesses. During the ramp-up phase on reopening the Company does not expect the businesses to generate positive operating cashflows.
“As at 30 April 2020, VRL had a net debt position of approximately $284 million – comprising $342 million of gross debt and $58 million of readily available cash.2 Undrawn debt facilities as at 30 April 2020 amounted to $5 million.
“The Company expects a net debt position of approximately $315 million at 30 June 2020. VRL has no near term debt maturities in its group debt facility and has received confirmation from its lenders that they will not apply financial covenants as at 30 June 2020,” Village said.
Village said it is in advanced discussions with lenders to increase its debt financing facilities.
