Village Roadshow & BGH – How are the share prices moving with Takeover Updates?

Summary

• Village Roadshow Limited announced that it had extended the exclusivity period by two weeks for its discussion with BGH Capital Pty Ltd.
• The Company is in discussion with BGH Capital about the proposed acquisition of all its shares.
• VRL had earlier received a revised proposal from BGH under which each VRL shares were offered at A$2.40 per share under a few terms and conditions.
• The share price was up marginally up on 16 June (+0.49%). The stock had jumped sharply by 20.7% on 18 May, the day of the revised proposal announcement.

Village Roadshow Limited (ASX:VRL) is engaged in cinema exhibition, film distribution, Theme Parks and providing marketing solutions. Village Roadshow started its operations in 1954, owning and handling one of the first drive-in cinemas in Australia in the Melbourne suburb of Croydon.

Recent Update on VRL’s Transaction Process Deed:

On 16 June 2020, Village Roadshow Limited announced the extension of the exclusivity period by two weeks for its discussion with BGH Capital Pty Ltd.

The Transaction Process Deed with BGH has been modified, with the first four-week period extended by two weeks to 30 June 2020. In case the parties continue to actively pursue the potential transaction, the exclusivity period may extend for another two weeks.

A Glance at BGH’s Revised Proposal:

Earlier on 18 May 2020, Village Roadshow Limited announced that it received a revised, non-binding proposal from BGH Capital to acquire all shares of VRL via a scheme of arrangement at A$2.40 each share.

After considering the proposal, Village Roadshow Limited and BGH Capital Pty Ltd entered into a Transaction Process Deed. Under the Deed, BGH Capital was given a chance to commence confirmatory due diligence and also discuss transaction documents over four weeks on an exclusive basis.

The BGH Revised Proposal to acquire all shares in VRL at an offer price of A$2.40 per share comprised of a:

• Base offer price of A$2.20 per share.
• Additional offer price of A$0.12 per share on the day when Warner Bros. Movie World and Sea World restarted for the people three business days before the day VRL shareholders were to come together & vote on the privatisation deal.
• It includes another A$0.08 per share if most of the Cinemas business locations have reopened to the public three business days before the day VRL shareholders come together & vote on the privatisation deal.

The additional offer price depends on few other criteria as per the Transaction Process Deed.

The offer price of A$2.20 per share and A$2.40 per share represents a 25-36% premium to the closing price dated 15 May 2020 and 51% to 64% premium to the A$1.460 VWAP from 19 March 2020.

The VRL stock had moved up by an impressive 20.7% on 18 May 2020.

COVID-19 Impact on VRL’s business:

Due to COVID-19, VRL’s Gold Coast theme parks (which comprise Warner Bros. Movie World, Sea World, Wet'n'Wild and Paradise Country), Australian Outback Spectacular Topgolf, as well as the Film Studios, were shut. Apart from this, the complete cinema circuit along with those sites which were operated by VRL’s partner Event was closed.

On the other hand, the other businesses of the Company like Roadshow Distribution & Marketing Solutions were operational at a diminished capacity. The revenue from these businesses does not form a substantial part of Group revenues in BAU situations.

Liquidity Position And Funding:

During the crisis, VRL implemented several ways to preserve capital as well as maintain operating liquidity and at the same time, confirming that the business is in a stable liquidity position to restart venues when suitable.

Further, VRL was also working with landlords & other suppliers to lessen the operating expenses considerably and defer non-essential capital expenses during the period. Many employees who were not performing critical tasks had to resign from their positions, and senior executives agreed to salary cut till 30 June 2020.

VRL also took part in the Commonwealth Government’s JobKeeper arrangements to help the continued employment of all qualified staff along with those who resigned because of the impact of coronavirus.

In Cinema Exhibition, VRL is deferring large capital expenses projects post COVID-19. The Company anticipates that capital expenses in FY2021 would be because of the maintenance in Village circuit and Event managed sites.

As the key businesses were closed, VRL anticipates its underlying operating cash costs after adjusting JobKeeper subsidies would be in the range A$10 million - A$15 million each month. Further, VRL projects an increase in operating cost in preparing for the restart of its key businesses.

As on 30 April 2020, the net debt position of the Company was around A$284 million. It had undrawn facilities of A$5 million. Further, VRL confirmed that it has no near term debt maturities in its group debt facility. It also got approval from its lenders that they will not apply financial covenants as on 30 June 2020.

As highlighted in the announcement dated 18 May 2020, the Company was in advanced discussion with lenders to increase its debt facilities. It had also progressed negotiations with Industry Groups as well as Government at Federal & State levels to build financial action plans & support.

Stock Information:

The VRL stock closed the day’s trade at A$2.180, an increase of 0.461% from its previous close. The Company has a market cap of A$423.7 million and around 195.25 million outstanding shares. In the last month, the shares have delivered a return of 5.97%.