PEP bids $517m for Australia's Village Roadshow

The private equity firm is offering to buy all outstanding shares for A$3.90 apiece through a scheme of arrangement, according to a filing. The offer represents a 23% premium to the December 18 closing price. Village Roadshow's stock ended December 19 up 21% at A$3.83 and closed at approximately the same level the following day.

PEP has agreed a call option on a 19% stake held by Village Roadshow Corporation (VRC), the company's largest shareholder. VRC is controlled by Robert Kirby and John Kirby, the sons or Village Roadshow founder Roc Kirby, and Graham Burke, the CEO. It was previously reported that the trio had disagreements about the future of the business. VRC currently owns 33.8% of Village Roadshow.

Established in Melbourne in 1954, Village Roadshow was manager of one of the first drive-in cinemas in Australia. Over the next 30 years, traditional cinemas and ultimately multiplexes were added to the portfolio and the company moved into film distribution and production. It listed in 1988 with the Kirby and Burke families retaining a significant shareholding through VRC.

In the 1990s, Village Roadshow started buying and building theme parks such as Wet'n'Wild, Warner Bros Movie World, Sea world, Australian Outback Spectacular, and Topgolf. It also expanded internationally, opening cinemas in 20 countries – before retrenching to the Australian market – and began co-producing and co-financing Hollywood movies through Village Roadshow Pictures. Recent co-productions include Ocean's 8 and Joker.

The company generated A$980.5 million in revenue for the 2019 financial year, up from A$952.8 million in 2018. Over the same period, the net loss widened from A$3.4 million to A$9.6 million. Theme parks, cinemas and film distribution together account for the vast majority of revenue, while marketing and asset impairments were behind most of the losses.

Cinemas – Village Roadshow operates 577 screens across 57 sites in Australia – contributed A$308.3 million in revenue, A$53.9 million in EBITDA, and A$32.7 million in operating profit in 2019. This compares to A$329.8 million, A$76.5 million and A$12.9 million for theme parks and A$288.9 million, A$8.6 million, and A$1.12 million for film distribution.

PEP, which will invest in the business through its sixth fund, which reached a first close of A$2 billion in June, should the deal go through, has previous experience with cinema chains. It owned Hoyts Group for more than seven years, turning it into Australia's second-largest cinema operator through a series of bolt-on acquisitions, before selling to Wanda Cinema Line Corp, a unit of Chinese property developer Wanda Group, in 2015.

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• Topics
• Australasia
• Media
• Buyouts
• Consumer
• Australia
• Pacific Equity Partners