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The proposed acquisition of Village Roadshow (ASX: VRL) by BGH Capital has been taken to a new level with BGH lowering its offer and Village opening up its books.
The move comes as the Melbourne-based fund is also reportedly one of the frontrunners in the bid to acquire Virgin Australia (ASX: VAH).
In a sign of Village Roadshow's COVID-19 woes, the revised offer from BGH comes at a significant discount; down from $4 cash per share in January to just $2.40 per share today.
The offer price includes a base offer price of $2.20, plus an additional $0.12 per share in the event that VRL's theme parks (Warner Bros. Movie World and Sea World) have reopened to the public three days prior to the date VRL shareholders vote on the deal.
It also includes an offer price of $0.08 per share in the event that a majority of VRL's cinemas have reopened three days before the shareholders vote.
The revised offer represents a 25 to 36 per cent premium to VRL's closing price on Friday 15 May of $1.77 depending on whether the base offer or the increased price is on the table at the time shareholders get to vote on the deal.
The two have entered into a Transaction Process Deed under which BGH will be provided with the opportunity to undertake confirmatory due diligence and negotiate transaction documentation over a four week period on an exclusive period.
COVID-19 has been a disaster for Village Roadshow's portfolio of entertainment businesses, with theme parks and cinemas closed to stop the spread of the coronavirus.
The company closed down its cinemas and theme parks on 23 March and have been unable to reopen them ever since.
VRL's other businesses Roadshow Distribution and Marketing Solutions continue to operate at a reduced capacity.
Today VRL announced it expects its operating cash costs net of JobKeeper subsidies to be between $10 million to $15 million per month.
During the ramp up and reopening phase VRL says it does not expect to be generating positive operating cashflows either.
As at 30 April VRL had a net debt position of approximately $284 million, comprising $342 million of gross debt and $58 million of readily available cash.
Undrawn debt facilities as at 30 April amounted to $5 million.
Today also marks a busy start to the working week for BGH Capital who have been named by the Australian Financial Review as one of four parties shortlisted for the takeover of Virgin Australia (ASX: VAH).
Though details are scant on GBH's bid in particular, the AFR revealed the company is in contention with Bain Capital, Indigo Partners and NY-based investor Cyrus Capital Partners.
The second round of negotiations begin today with final bids to be lodged by June 12.
BGH has been hungry for ASX-listed companies of late after completing a takeover of education services provider Navitas (ASX: NVT) for $2.1 billion in March 2019.
Shares in VRL are up 12.75 per cent to $1.99 per share at 11:32am AEST.
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