Village Roadshow, the embattled Australian studios, cinemas and theme parks group, has received a takeover offer worth more than $500 million from a financial group.
The company is listed on the Australian Stock Exchange, where share trading was halted ahead of the announcement. Management said that it is considering the offer, and that it will cooperate with the bidder’s due diligence.
The bid is made by Pacific Equity Partners on behalf of funds it manages. PEP is offering A$3.90 per share. That compares with the A$3.20 price immediately before the trading halt. The offer values Village Roadshow’s ordinary equity at $523 million (A$761 million).
PEP says that it has already agreed to buy a 19% stake (at A$3.90 per share) from Village Roadshow Corporation, a privately-owned company that includes Village Roadshow executives Graham Burke and John Kirby, and is Village Roadshow’s largest shareholder with a total 34% holding.
Among its interests and activities, Village Roadshow owns 31% of the New York-based sales and production company FilmNation, and a 24% stake in iPic, the North American cinema chain which went bankrupt in August. It is also the operator of the Lionsgate theme park recently opened in Zhuhai, China.
Village Roadshow owns only a 20% stake in Village Roadshow Entertainment Group (VREG), a U.S-based content development and production entity. In 2017 New York-based Vine Alternative Investments acquired a controlling interest of 80% in VREG. Boston-based Falcon Investment Advisors is another VREG minority shareholder. Sources say that they do not expect any direct impact on VREG from the possible takeover activities related to Village Roadshow.
Most of Village Roadshow’s activities are located in Australia. There, it runs the Village Roadshow Studios, which is both a theme park and one of the largest film studios in the Southern hemisphere. The studios include nine stages and three water tanks and were used to shoot Hollywood movies including “Aquaman,” “Thor: Ragnarok” and “Kong: Skull Island.” Its cinema exhibition chain, operated under the Village Cinemas brand, counts 57 complexes and 577 screens.
The company has endured a period of feuding among the controlling family, and has been planning for the exit of industry veteran Burke as CEO by the end of 2019. He is scheduled to be replaced by current theme parks boss Clark Kirby from 2020. It claimed that the 2018-19 financial year was part of a “reset and transition” after two rotten years.
Company directors Rob Kirby and Burke came under fire in 2018 from John Kirby, another family member and board director. He accused the management of running the company poorly, notably issuing inaccurate forecasts, and poor capital management.
Frustrated by a collapse of the company’s share price from a peak of A$7.92 in 2014, to as low as A$1.77 in July 2018, John Kirby sought to bring in an investment bank and hatched a proposal to break up the company.
Village Roadshow has been faced with a succession of headwinds for the past two or more years. In October 2016 a fatal accident that killed four people occurred at the Dreamland theme park, owned by Ardent Leisure. Attendances dropped at theme parks around Australia, and in its 2018 results Village Roadshow blamed it for the downturn in its leisure division.
The group’s cinema operation and film distribution activities have both been hit the arrival of streaming video operations – notably global giant Netflix – which has had particular success in Australia – and local platform Stan. The company results statement earlier this year acknowledged what it called a “Netflix effect” and said that its film acquisition strategy has been “reoriented” and will become more selective.
In 2018 and 2019, Village Roadshow has taken multiple steps to strengthen its balance sheet. These include a $36 million (A$50 million) equity raising in June 2018, the sale of the Wet ‘N Wild theme park in October (which John Kirby opposed), and a $265 million (A$374 million) debt refinance program in December. In the previous financial year, Village sold its 50% stake in leading Singapore cinema chain Golden Village for A$154 million ($106 million).
Pacific Equity previously bought Australia’s Hoyts cinema chain in 2007. It sold Hoyts to China’s Dalian Wanda in 2014.