Consumer cyclical

Ardent Leisure to pay out more on sale of Main Event than expected: Cut-off date 4 July

Mon 30 May 22, 4:08pm (AEST)
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Key Points

  • 95 cps of net proceeds from Main Event sale to be returned to shareholders as an unfranked special dividend
  • Ardent Plans to repay debt and support the ongoing recovery, growth and development of its Australian businesses
  • Payment of the capital return and dividend: Wednesday 13 July 2022

Assuming there’s a yes vote by Ardent Leisure (ASX: ALG) shareholders 29 June on the sale of the entire Main Event Entertainment business (“Main Event”) to Dave & Buster’s Entertainment, Inc. (NASDAQ: PLAY) for US$835m ($1.1bn) the theme parks owner will reward investors with a significant distribution.

The board plans to make a significant distribution to shareholders of up to $455.7m - higher than the originally flagged $430m - (approximately 95 cents per share) of the net proceeds from the proposed transaction in the form of a return of capital and an unfranked special dividend.

Back the deal

Being all cash, chairman Garry Weiss believes the proposed transaction offers significant and certain value and urges investors to vote in favour of the deal.

After valuing Main Event at between $US800m and $US900m on a cash and debt-free basis, independent expert Lonergan Edwards & Associates also believes the deal is "fair and reasonable to and in the best interests" of Ardent shareholders, in the absence of a superior proposal.

Assuming shareholders agree to the sale of Main Event, but not the proposed capital return, the company expects to make the special dividend of approximately $200.7m and may increase this amount or consider alternative ways to return additional proceeds.

What’s left over

Following the sale of Main Event the company will be solely focused on its Australian Theme Parks business.

Ardent plans to use around $60.7m of net proceeds to repay in full the debt drawn under the Queensland Treasury Corporation facility and the amount owing to the ATO under a settlement reached in September 2019.

The expected balance of net proceeds from the proposed transaction of approximately $152.9m has been earmarked to support the ongoing recovery, growth and development of the theme parks & attractions business, including the Dreamworld resort in Qld.

Important dates

Expected last day for trading of shares entitled to participate in the capital return and special dividend: Monday 4 July 2022.

Expected date of payment of the capital return and dividend: Wednesday 13 July 2022.

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Ardent Leisure share price over 12 months.

What broker’s think

While Ardent was up 7% to $1.39 early April following news that the Main Event business was being sold off, the company was up another 1.48% in late afternoon trade.

After peaking at $1.60 late February, the share price is back around where it was at the start of the year. However, over the year the stock is up 34.65%.

Consensus on Ardent is Moderate buy.

Based on Morningstar’s fair value of $1.52, the stock appears to be undervalued.

Citi expects the timing of weakness to support the timing of Ardent's decision to sell Main Event to Dave & Busters and retains a Buy rating and target price of $1.96 (11/905/22).

 

Written By

Mark Story

Editor

Mark is an investigative financial journalist and editor who started his career working for Marathon Oil in London. He has a degree in politics/economics and a diploma in journalism. Mark has worked on 70-plus newspapers and financial publications across Australia, NZ, the US, and Asia including: The Australian Financial Review, Money Magazine, Australian Property Investor and Finance Asia. Mark is passionate about improving the financial literacy of all Australians through the highest quality content. Email Mark at [email protected].

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