Village and Sydney Attractions play dirty

Six weeks after Village Roadshow's takeover bid for Sydney Attractions Group, the tactics are from each party are getting dirty as they both vie for the future control of the Sydney-based tourism operator.

In early September, Village Roadshow, already a 20 per cent shareholder in Sydney Attractions Group offered $6.01 per share an all-cash offer for the company valued at up to $166 million, conditional on at least an acquisition of 50 per cent of the company's shares. The Sydney Attractions Group's Board advised that they believe the offer undervalues the company and urged shareholders not to sell. The Board believes that shares are are valued at $8.59-9.37; 40-55 per cent above Village's offer.

Managing Director of Village Roadshow Graham Burke hit back with a letter addressed to Fellow Sydney Attractions Group Shareholders, outlining their lack of confidence in the performance of the company. Included were seven key reasons for shareholders to accept the offer:

1. SAG's forecasts are overly optimistic and not supported by their track record.
2. SAG have not met a number of forecasts since 2006.
3. SAG's $8.59-9.37 valuation has not been undertaken by an independent expert. Their advisers have disclaimed responsibility for their support of SAG's forecasts.
4. SAG's share valuation bears little relationship to market values of comparable companies.
5. Village's offer represents a price earnings ration in excess of 20 times SAG's optimistic profit forecasts.
6. SAG has advised that share prices may in fact fall below the offered price in the absence of the Village buyout bid.
7. Past acquisitions in the tourism and theme park industries have averaged 9.5 times Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA). SAG's valuation of up to $9.37 is 18 times EBITDA.

The 8-page letter went on to outline many of Village Roadshow's doubts about Sydney Attraction Group's present and future.

In response, Sydney Attraction Group's Chairman Bill Wright has issued a letter to shareholders, insisting once again that shareholders reject Village Roadshow's offer. Wright claims that Village Roadshow is undertaking a campaign to convince shareholders to sell at a price well below fair value.

"Village’s latest letter to you is simply a continuation of that campaign. You should ignore it. Village’s aim is to acquire your Shares as cheaply as possible. Any statements from Village should be read with this in mind.

Moving into aggressive territory, Wright insists that Sydney Attraction Group's current management team are the best to operate the company's tourism operations, citing 20 years experience with the Sydney Aquarium. He adds that they operate with much higher margins and lower capital expenditure than a theme park.

On Village Roadshow's experience in the tourism industry, Wright contests that, "[SAG's] business relies on delivering education and entertainment, not roller-coasters and fairy floss."

Village Roadshow have extended their takeover offer until November 17.