From left field, Kerry Packer’s Consolidated Press Holdings launched a takeover bid Wednesday for Hoyts Cinemas, valued at $A609 million ($384 million), after securing options for a 17% stake in the exhibition company.
Packer’s move comes six weeks after Hoyts disclosed it had hired investment bank B.T. Wolfensohn to explore the possibilities of selling or merging its 900-screen U.S. loop which is concentrated in Northeastern states.
Sensing a bargain, Packer is bidding $A2 ($1.26) cash per share, 9.4 cents above Hoyts’ closing price Wednesday and well below its 1998 high of $1.90, as Hoyts’ stocks have suffered from the malaise which has marked down the values of most U.S. and Australian exhibition stocks.
Before the Australian Stock Exchange opened today, buyers were offering as much as $1.34 a share, indicating Packer probably will have to sweeten his offer if it is to succeed.
Ashok Jacob, deputy CEO of Packer’s family-owned company, said CPH is keen to get 100% of Hoyts, but he would not be surprised “if we don’t receive another share… . I think we’re going to be long-term, patient investors.”
The response by Hoyts CEO Peter Ivany, the second-biggest investor with 15%, will be crucial in determining whether CPH’s bid succeeds. Hoyts advised shareholders to take no action until they receive the board’s recommendations, which are expected within a few days. Warburg Dillon Read has been appointed as Hoyts’ financial advisers. CPH’s offer will remain on the table for at least one month after the bid is lodged with the Stock Exchange.
The Hoyts board was due to meet at lunchtime today in Sydney. Warburg Dillon Read is recommending Hoyts commission an evaluation of the company before making a formal response.
Packer’s foothold in Hoyts, which operates 1,662 screens in nine territories, comes from options to buy half of the 25% stake held by San Francisco merchant bank Hellman & Friedman (which came aboard when Hoyts floated on the Australian Stock Exchange in 1996) and all of developer Lend Lease’s shares.
Packer himself has close links with the Hoyts board: Chairman David Gonski, a lawyer, frequently advises CPH, and director Brian Powers is a former chief exec of CPH.
This is Packer’s second foray into exhibition. Sister company Publishing & Broadcasting Ltd. was a significant shareholder in Village Roadshow until cashing out for a handsome profit in 1996. CPH has an option to lift its holding in screen advertising contractor Media Entertainment Group to 40%.
PBL itself has been on a corporate binge recently, highlighted by a merger with casino operator Crown, buying 25% in the News Ltd./Telstra pay TV vehicle Foxtel, and a stake in cellular phone business One.Tel. PBL owns a slice of Arnon Milchan’s Fox-based production banner New Regency.
Ivany has consistently said that Hoyts’ share price reflects almost no value in its interests outside Australia, which apart from the U.S. includes theaters in Mexico, Argentina, Germany and Austria.
Last week he told Daily Variety he expected the process of deciding whether to merge, sell or spin off the U.S. circuit into a separate entity would take three to six months. Packer’s bid almost certainly throws that timetable up in the air.