Shares of Reading International are up about 5% so far this week and touched an all-time high of $17.18 today after Patton Vision’s Paul Heth released a letter to the company disclosing that a consortium he’s leading has raised its offer for the nation’s No. 11 exhibition chain by 8.8% to $18.50 a share — or $436 million.
He told CEO Ellen Cotter that “the time has come for all shareholders of Reading to learn and understand our offer,” which provides “an elegant, expedient and profitable solution to maximize shareholder value.”
The initial offer became public in July when board member James Cotter Jr. mentioned it in a public filing he made in a suit in Nevada. He charged that he was fired as CEO last year as a result of family squabbles that have affected company governance, and resulted in self-dealing and excessive executive pay.
Others in the consortium with Patton Vision include investment firm TPG and the Santo Domingo Group which owns a major stakes in AB InBev and in South American exhibitor Cine Colombia.
The group says that it upped its offer despite “the volatility and concern in the sector caused by recent announcements and speculation specific to film release windows in the cinema industry.”
The letter says that Reading management has refused to meet. The bidders specifically want to know whether the company has engaged an independent financial advisor to assess the terms, or formed a special board committee to evaluate them.
“In terms of transparency, the time has come for all shareholders of Reading to learn and understand our offer, and the rationale of our proposal,” the letter says.
Reading shares are up nearly 33.8% since November 7, which the bidders say “is likely due to recent media attention regarding our previous offer.”
Reading confirmed today that it received the offers and “will review the revised unsolicited, conditional proposal in due course.”
As for the previous bids, the board consulted management and outside advisors and “determined that our stockholders would be better served by pursuing our independent, stand-alone strategic business plan and communicated this to Patton Vision.”
B. Riley analyst Eric Wold, for one, says the sweetened offer still undervalues Reading, even though it’s higher than Wall Street’s view of its worth.
Reading’s story “is only beginning to manifest in the valuation and accepting any offer around these levels now would be extremely premature and undercut shareholders’ future opportunity to realize value,” Wold says.
He urges traders to buy “as investors are likely to become increasingly confident assigning more appropriate valuations to some of the company’s undeveloped/underdeveloped real estate assets.”