An Australian federal court on Tuesday gave its approval for a takeover of Village Roadshow Limited by private investors after a year-long battle that saw the company’s value rollercoaster almost as much as its theme park rides.
A shareholder meeting last week gave its approvals for two, connected, takeover schemes put together by BGH, overcoming significant objections from a dissenting U.S. investor, and winning the support of another. The court agreed to the Scheme A, which prices VRL’s ASX-listed shares at A$3 apiece, giving the company an implied valuation of A$585 million ($440 million).
Following the court approval, share trading will end on Wednesday afternoon. The takeover is expected to be completed by Dec. 29 and may bring to an end a period of particular instability.
The company has been in the wind for several years due to bitter feuding between the controlling Kirby family and its allies, and at the beginning of 2020 its shares stood at half their 2014 valuation. Bankers tried to end the impasse with an auction that they expected might attract at least four bidders for the iconic company and its portfolio of well-known entertainment assets.
Village Roadshow Limited is operator of the Village Roadshow cinema chain, with 57 cinemas and 577 screens, and owner of film distributor, Roadshow Distribution. It is also one of the country’s largest operators of theme parks, including Queensland-based Sea World, and the Warner Bros. Movie World that is linked to the Warner film studios. The company also has a 31% stake in New York-based film sales and finance company FilmNation, and a 20% stake in Hollywood film financier Village Roadshow Entertainment Group.
The first takeover approach by private equity firm PEP emerged this time last year, and was followed in January 2020 by a A$4 per share offer from BGH, which would have also cemented the position of Clark Kirby as CEO.
The coronavirus crisis and Australia’s harsh lockdown measures, however, sent the publicly-traded shares crashing to A$0.86 by mid-March. At that level BGH might have walked away. Instead, as the national economic outlook improved, BGH came back with revised offer schemes of A$2.32 and A$2.22.
Financial investors Mittelman Group, which amassed a 15.6% stake, and Spheria Asset Management, with 7.8%, held out for more, and in mid-November succeeded in persuading BGH to increase its two alternative, but concurrent, offers.
Spheria voted in favor of the revised BGH proposal and has since ceased to be a substantial shareholder. Mittelman voted against, but was defeated, and remains convinced that the process was not fair. “I am bitterly disappointed. Not just for myself and our clients and shareholders, but for every smaller shareholder who rightly feels ripped off by those who should have been watching out for their interests, during a pandemic no less. A disgraceful affair for all who facilitated it,” Christopher Mittelman told the Australian Financial Review this week.
With Village Roadshow Limited having increased its debt during the months lockdown and restricted inter-state travel, and Roadshow Distribution having losing its contract to handle films for Universal, determining the true value of the company may take months or years. As well as management decisions, recovery in its fortunes will depend on Australia’s ongoing pandemic response, the availability and effectiveness of the COVID-19 vaccines, and a renewed supply of Hollywood movies into Village’s cinemas.