Second Billabong Buyer Withdraws

Posted by Admin |September 22, 2012

Second Billabong Buyer Withdraws

With one rumoured unsuccessful takeover bid on the table Billabong has been dealt another blow with the second private equity firm looking to make a takeover bid for Billabong withdrawing its bid. This departure from the negotiation by a second company undeniably puts pressure on the brand's retailer's shares.

Billabong has been attracting attention from buyout groups following a 38 per cent fall in its share price in the past year as it cut earnings and sold new stock to reduce debt.

The surf wear company announced on September 6 it had received a second takeover offer from an unspecified private equity firm rumoured to be Bain Capital, just weeks after another private equity firm, TPG made an offer. Both proposals valued Billabong at $694.5 million, or $1.45 per share.

Billabong's shares slumped as much as 6.9 per cent after coming out of a recent trading halt and were recently trading at $1.335, down 11 cents, or 7.6 per cent. This is lower than the value of both the takeover offers.

IG Markets analyst Cameron Peacock said the share price drop indicated shareholders were disappointed the second takeover offer had been pulled off the table. ''They are a struggling retailer,'' he said. ''As a shareholder the only reason you would have been comfortable holding this stock was because it was under takeover offer. ''I'm surprised it is only down seven per cent.''

The retailer had said both offers failed to reflect the core values of the organisation, but had begun a formal process to assess whether a higher takeover offer could be secured. TPG apparently remains in discussions with Billabong although this cannot be confirmed.

''The board of Billabong reiterates there is no guarantee that, following this formal process, a transaction will be agreed or that the board will recommend any proposal,'' the company said.

Last month, the company posted a $276 million net loss, its first since listing in 2000, and wrote off 42 per cent of the value of its namesake label. This was attributed to a consumer slowdown in Australia forced it to sell stock at a loss to clear inventory and close stores.

"Billabong is an Australian English word meaning a small lake."

- Wikipedia

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