The Village Roadshow Ltd (ASX: VRL) share price is soaring today after providing an update on its takeover offer from BGH Capital. At the time of writing, the Village Roadshow share price is almost 16% at $2.84.
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What's in the new offer
Village Roadshow advised it has received an amended cash consideration to acquire control of the company from BGH Capital. The revised offer consists of either of a 'Structure A Scheme' of $3.00 per share or 'Structure B Scheme' of $2.95 per share.
Following the announcement, Village Roadshow revealed that major shareholder Spheria, will vote in favour of either arrangement. The backflip comes after the latter expressed its intentions to vote against the original format earlier this month. BGH Capital previously offered $2.32 for Structure Scheme A and $2.22 for Structure Scheme B.
Spheria currently holds 6.88% of Village Roadshow shares, with another 0.91% of shares that are represented by the company. In total, 7.8% Village Roadshow shares are expected to approve either scheme.
Board recommendation
Further to the release, the independent directors have unanimously recommended that shareholders vote in favour of each alternative scheme. The directors believe that the BGH transaction is in the best interest of all parties involved. This comes as the company is operating in an uncertain environment marred possible lockdowns should new COVID-19 waves occur.
At the request of the directors, independent expert Grant Samuel & Associates put the new proposed takeover above the value range. The opinion of the latter, estimates Village Roadshow shares to be anywhere between $2.03 and $2.80 per share.
What's next?
Village Roadshow will engage with ASIC and the court on further steps to be taken as a result of the increased consideration. Details regarding the supplementary disclosure materials are anticipated to be released to the ASX within the coming days. Subject to court approval, Village Roadshow will hold the scheme meeting on 7 December.
Update on debt, cash flow and liquidity
In the period ending 31 October, Village Roadshow generated a positive operating cash flow of approximately $5 million. Considering the government's JobKeeper program and other benefits, the company recorded a negative cash flow on a post-capital expenditure basis.
Net debt stood at approximately $311 million, comprising of $370 million of gross debt and $59 million cash in hand.
Undrawn debt facilities totalled around $50 million out of total group debt facilities of $420 million.
Village Roadshow predicts operating cash flow between the November and June period to be at a loss of $5 million to $15 million. In addition, the group projects to spend $55 million of capital expenditure prior to the end of the 2020 financial year. Consequently, net debt is projected to be in the range of $370 million to $380 million.
