Good news for the minority shareholders in Village Roadshow (VRL), with the company taking the money and running from Southern Cross Media’s bid for Austereo and using the cash to make a capital return of $1 a share.
As well the company says a review of costs has found savings of $20 million.
But while minorities might cheer (especially with the share jumping 15% yesterday to $4.00, a new 52 week high), the controlling Kirby family and associated interests will get the lions share of the benefit through their holding of 68.17% of the company, or more than 77.8 million shares.
Village Roadshow says it has accepted Southern Cross Media’s (SCM) offer in respect of its holding of 181,093,856 Austereo shares and will take the cash.
VRL said it will "receive initial gross proceeds from the sale of approximately $362 million. If SCM reaches the 90% compulsory acquisition threshold and is entitled to proceed to compulsory acquisition, VRL will receive approximately $18 million in further gross proceeds."
"After payment of costs associated with the transaction, VRL anticipates that the pre-tax profit from the sale of its AEO shares (based on a $2.10 per share sale price) will be approximately $205 million.
"Based on current projections, VRL anticipates tax payable in respect of the 30 June 2011 financial year (including tax on the sale of its AEO shares) of approximately $60 million.
"In addition to the previously announced Sydney Wet’n’Wild Water Park, Village Roadshow Theme Parks (“VRTP”) is actively pursuing a number of exciting opportunities in China.
"VRTP, as VRL’s largest division, is exploring development opportunities in key growth regions of Guangzhou and Hainan Island and leveraging its valuable intellectual property and management expertise.
"A non-binding letter of intent has been signed with a Chinese developer and the VRL group intends to continue to pursue these opportunities.
"As previously reported Village Roadshow Entertainment Group (‘VREG”) is continuing to examine the possibility of being listed on an international stock exchange and raising additional equity. As part of a potential listing, VRL intends to retain its existing investment in VREG and may inject further equity into VREG of $20 million – $30 million. VREG is a core asset of the VRL group and at year end is looking forward to two major releases in HAPPY FEET 2 and SHERLOCK HOLMES 2."
The company said that after paying the tax and the above investments, Village Roadshow "will have substantial surplus cash. VRL intends to distribute $1.00 per share to all VRL shareholders in July 2011. Part of this distribution may be a return of capital.
"VRL anticipates being able to fully frank the balance of the $1.00 distribution to shareholders. VRL will seek shareholder approval for any return of capital at a shareholders meeting anticipated to be held before the end of June 2011. When VRL has further progressed the class ruling the Company will announce the date of the shareholders meeting and will provide further information on the timing of the distribution and the allocation between capital and dividend (including the level of franking).
"The net proceeds from the recent sale of Sydney Attractions Group were used to repay borrowings under VRL’s corporate debt facility. The VRL Board considers that on a consolidated basis, following the theme park and film production investments, and the distribution to shareholders, VRL group gearing will continue to be at conservative levels.
"In light of VRL’s recent divestments, the Board commissioned Ernst & Young to conduct an extensive independent review of the corporate cost structure within VRL. The Board has adopted the recommendations in the Ernst & Young report.
"The management initiatives adopted include annualised net cost savings of approximately $10 million, of which in excess of $3 million relates to a reduction in total remuneration of the executive directors. The report also recommends the reallocation of approximately $8 million of corporate costs to VRL’s divisions, resulting in a total reduction in VRL’s corporate costs of almost $20 million."
VRL CEO Graham Burke said in the statement: “We have listened to our shareholders and have taken the necessary steps to ensure the strength and security of our company for the long term.
“In adopting the recommendations contained in the Ernst & Young report, our corporate costs will be more in line with industry standards for a more streamlined and agile company, ready to build on our existing brands and explore new growth opportunities.”
