BGH Capital is in talks with Village Roadshow to acquire the cinema and theme park owner for between $429.4 million and $468.5 million.
The Melbourne private equity firm has made a non-binding offer to pay at least $2.20 a share, and up to $2.40 a share, if Village Roadshow’s two Gold Coast theme parks and most of its cinemas have reopened by the time shareholders meet to approve the transaction.
That is a premium of between 25 per cent to 36 per cent from Village Roadshow’s closing price on Friday.
BGH, which is also one of four bidders shortlisted to buy the grounded Virgin Australia, still needs to complete due diligence on Village Roadshow. That is expected to take four weeks.
It also needs to arrange debt financing and the transaction requires Foreign Investment Review Board approval.
“There is no certainty that the proposal will result in a transaction,” the company said.
Village Roadshow has been mulling competing offers from BGH and Sydney’s Pacific Equity Partners since December.
Robert Kirby and Clark Kirby – the son and grandson of Village Roadshow founder Roscoe “Roc” Kirby – would remain as executive chairman and chief executive in the privatised business if the deal went through, the company said.
Village Roadshow released a trading update showing it has only enough cash to last a few more months at its current burn rate. But it said it was in “advanced discussions with lenders to increase its debt financing facilities”.
While its key businesses remain closed amid ongoing coronavirus restrictions, Village Roadshow expects operating cash costs, including the federal government’s JobKeeper subsidy, maintenance and safety capital expenditures, to be between $10 million to $15 million a month.
The company had just $58 million in readily available cash as of April 30 and only $5 million in undrawn debt facilities.
It had $342 million in gross debt, although none of that is maturing in the near term and its lenders will not apply financial covenants as of June 30.
Village Roadshow’s Gold Coast theme parks – Warner Bros Movie World, Sea World, Wet’n’Wild and Paradise Country – have also been closed since March 23 because of the coronavirus crisis.
Its 57 cinemas across Australia, some run as part of a joint venture with Event Hospitality and Entertainment, are also shut.
Village Roadshow said it was also in talks with industry groups and state and federal government leaders to develop financial action plans and support.