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Why Ardent Leisure Group (ASX:AAD) shares are closing in on a 52-week low

In morning trade the Ardent Leisure Group (ASX: AAD) share price has taken a tumble and is down over 1% to $1.72.

This has left the struggling entertainment company’s shares trading just a fraction above their 52-week low of $1.68.

Why are its shares in the red today?

Hot on the heels of the Freedom Insurance Group Ltd (ASX: FIG) strategic review, Ardent Leisure has completed its own review into the merits of its current stapled structure.

According to the release, the company has decided that the complexity of Ardent Leisure’s current stapled structure is no longer appropriate and that the corporatisation and associated streamlining of the structure is in the best interests of security holders.

As a result, the Ardent Leisure Trust has proposed for the corporatisation of the Ardent Leisure Group which will involve a new company called Ardent Leisure Group Limited becoming the single head entity of the Ardent Leisure Group in place of the current stapled structure.

Following implementation of the proposal, the Ardent Leisure Group also intends to undertake a solvent restructure which will align the group’s structure to its two business divisions, Australian Theme Parks and US Entertainment Centres.

It is worth noting that neither the proposal nor the restructure will result in any change to the composition of the boards of directors, the management of the company, or its operations, assets and liabilities.

What is the rationale for such a move?

Chairman Dr Gary Weiss explained: “Consistent with the Ardent Leisure Group’s focus on delivering increased value to its securityholders, the Proposal and Restructure are expected to deliver a number of benefits, including greater flexibility to fund investment into growth of Main Event and Dreamworld, the capacity to make Ardent Leisure Group more attractive to a broader range of investors and reduce the regulatory uncertainty associated with stapled structures.”

What now?

Whilst this isn’t the most exciting news you’ll hopefully see out of the company in FY 2019, I believe it is an important piece and could help push its share price higher if successfully implemented.

However, the main driver of its share price over the next 12 months will undoubtedly be the performance of its theme parks and Main Event centres in the United States.

Their performances have been thoroughly underwhelming of late and really needs to pick up in FY 2019. While I’m optimistic that this will happen, its shares remain a hold in my eyes until there is evidence of an improvement.

Until then, I would suggest investors consider sector peers Aristocrat Leisure Limited (ASX: ALL) and Crown Resorts Ltd (ASX: CWN).

Alternatively, this buy-rated growth share could be the best of them all. Especially after its recent pull back.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Crown Resorts Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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