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Village Roadshow shares jump 19% higher on takeover news

This afternoon Village Roadshow Ltd (ASX: VRL) shares have returned from a trading halt and surged higher.

At the time of writing the entertainment company’s shares are up 19% to $3.82.

Why was Village Roadshow in a trading halt?

Village Roadshow requested a trading halt in order to allow it time to provide information about a potential corporate control transaction.

This announcement has now been made and reveals that it has received a conditional, non-binding and indicative proposal from Pacific Equity Partners.

According to the release, Pacific Equity Partners has made a proposal to acquire 100% of the company by way of a scheme of arrangement at an indicative price of $3.90 per share.

In addition to this, Village Roadshow has revealed that its largest shareholder, Village Roadshow Corporation, has entered into an arrangement with Pacific Equity Partners. That arrangement sees Pacific Equity Partners take a call option over approximately 19% of the company’s issued shares.

The release advises that Pacific Equity Partners has indicated it is willing to offer full cash consideration or a combination of cash and scrip in a newly incorporated acquisition entity.

What now?

The proposal is subject to a number of conditions. This includes the completion of due diligence, arrangement of financing, FIRB approval, and the recommendation of the board.

In respect to the latter, the board has advised shareholders to take no action in respect to the proposal. It is currently considering the proposal and is obtaining advice from its financial and legal advisers.

It explained: “The Board believes that shareholders’ interests are best served by conducting exploratory discussions with PEP to determine whether a proposal that is in the best interests of VRL shareholders can be put forward. As part of these exploratory discussions, VRL is prepared to provide PEP with due diligence information, subject to an appropriate confidentiality agreement.”

It will inform shareholders of the outcome of the discussions when it is in a position to do so. But warned that the process may take some time and there is no certainty that an acceptable proposal will eventuate.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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