Australian surfwear company Billabong ends takeover talks
04 Jun 2013
Struggling Australian surfwear company Billabong International Ltd has ended talks with potential suitors and is now looking at asset sales and refinancing to keep itself afloat.
The company's stock price today plunged by nearly 58 per cent or more than a third of its value after it announced that it was looking at refinancing options with the suitors instead of an outright sale.
A consortium comprising of Paul Naude, director and president of Billabong's US unit and private equity firm Sycamore Partners and a consortium made up of private equity firm Altamont Capital Partners and US clothing group VF Corp had in December 2012 tabled an $544 million indicative bid without conducting due diligence.
After going through Billabong's books, the consortium had lowered its offer to A$287 million ($300 million), while the Altamont Capital consortium's offer was around A$250 million.
The lowered offer had come a year after the company's founder Gordon Merchant, holding 14.55-per cent stake, had rejected a A$3.30 a share or $$904 million offer from TPG Capital, saying that he was looking at over $4 per share offer.
Billabong's stock has tumbled from a high of A$14.06 in 2007 to A$0.19 today morning.
The Queensland-based company is now talking to both the consortiums on either capital injection or asset sales or both to raise funds to repay its $286 million syndicated debt facilities.
''The refinancing is intended to provide the company with a comprehensive solution and an appropriate capital structure,'' said Billabong chairman, Ian Pollard. ''It's our intention to conclude these discussions as soon as practically possible.''
The company is planning to sell its Canadian retail chain West 49, which it had acquired in 2010 for $91million.
To make matters worse for the surfwear giant, the company also announced a profit downgrade - its fourth since December 2012.
After rejecting TPG's offer, Billabong announced a major restructuring that included job cuts and the partial sale of its watches and accessories company, Nixon, cutting production lines, and expanding its online business
Under the restructuring, Billabong, which had 634 stores in Australia, Europe, and the Americas, has already closed 140 stores, most of which were set up three years back.
Apart from the Billabong brand, the company sells surfwear and accessories under the Palmers Surf, Honolua Surf, Swell.com, Von Zipper, Kustom (footwear), Nixon, Xcel Wetsuits and Tigerlily brands, and also Element skate clothing and hardware.
Billabong's products are licensed and distributed in more than 100 countries and are available in approximately 11,000 stores worldwide. Products are distributed through specialised boardsports retailers and through the company's own branded retail outlets.
The majority of it's A$1.79 billion revenue is generated through wholly-owned operations in Australia, Japan, New Zealand, South Africa and Brazil.
