Village Roadshow’s two largest independent shareholders have separately taken steps to block a $450 million takeover by prominent private equity firm BGH Capital after raising concerns about the price on the table.
Market sources told The Sydney Morniing Herald and The Age that Mittleman purchased more than one million shares in Village over the past two days, bringing its stake to about 12 per cent – a shareholding that could block one proposal by Melbourne-based BGH and put a second at risk of falling over.
Meanwhile, Spheria Asset Management co-founder and portfolio manager Matthew Booker confirmed his firm, which is the second largest independent shareholder in Village with a 7.8 per cent stake, said it would vote against one of two proposed takeover structures days after expressing disappointment with the price on the table.
“We are voting against scheme B in the current format,” he said. “We believe the vaccine is a game changer and we want to recaptailise the business.”
Shares in Village have spiked 10 per cent in the past two trading sessions, in part buoyed by news of progress on a coronavirus vaccine. The stock was trading up 1¢ at $2.51 at about noon on Wednesday, above the takeover prices and implying some investors are holding out hopes for a higher bid.
Village and BGH announced a takeover proposal in August whereby investors could receive up to $2.45 per share in the company, which owns Sea World, Warner Bros Movie World and Wet N Wild.
One structure offered shareholders a base price of $2.20 per share and up to 25¢ per share in cash dependent on the reopening of theme parks, cinemas and Queensland borders. Brothers John Kirby and Robert Kirby and former chief executive Graham Burke control about 42 per cent of the company, but cannot vote under this scheme.
A second scheme offered a lower $2.10 per share offer with up to 25¢ in additional payments. The Kirby brothers and Mr Burke can vote on this structure. But the public opening of Village’s Warner Bros, Movie World and Sea World theme parks only triggered a 12¢ lift in BGH Capital’s takeover bid, raising the two offers to $2.32 per share or $2.22 per share. The additional 13¢, contingent on the reopening of state borders and cinemas, is now off the table.
Mittleman chief investment officer Chris Mittleman declined to comment on it increasing its stake, which came as Village shares climbed 6.4 per cent to $488 million on Tuesday – its highest point since March.
Mr Mittleman has already expressed his intention to block the bid when it is put to a vote on November 26 and has threatened to sue the directors of Village and an independent committee for their alleged failure to discharge duties to shareholders. By buying shares, Mr Mittleman is making it increasingly difficult for BGH, which is led by Ben Gray and Robin Bishop, to succeed in buying the theme parks and cinema operator.
Assuming all shareholders vote at the scheme meeting later this month, Mittleman would need about 15 per cent of the vote to block scheme A and about 25 per cent to block scheme B. However, it’s unlikely all shareholders will vote, meaning that scheme A could be blocked based solely on Mittleman’s vote.
Mr Mittleman said earlier this week that other small investors are also unhappy with the current proposal.
“We’ve still heard no feedback from any other large shareholders about voting intentions, but many smaller holders have reached out to us to voice their support of our position,” he told the Herald and The Age.
But while the two major independent investors are unconvinced of the takeover bid, others believe the transaction will go through. An advertisement by World Animal Protection appeared in The Australian Financial Review on Wednesday asking BGH Capital to end captive breeding of dolphins at Seaworld if they are successful in taking over the company.
Village was hit hard by the coronavirus pandemic because social distancing restrictions caused its cinemas and theme parks to suspend trading. But the challenges of the pandemic only added to the problems Village has faced. The Kirby brothers were caught in a bitter and public family feud in 2019 over the leadership and direction of the company. Village Roadshow’s market value has tanked from $1.2 billion to $447 million since 2014. It still has a large debt pile and will be required to raise a large amount of capital – at least $100 million – if the deal falls over.
Chair of the independent committee of the Village board of directors, Peter Tonagh, said on Monday the company still unanimously believes the transaction is the best option available.
“The cinema sector is undergoing significant structural change, not just temporary COVID impact while theme parks will continue to be impacted by domestic and international border restrictions,” Mr Tonagh said.
Source: Thanks smh.com