Billabong Receives Another Takeover Bid

Billabong Receives Another Takeover Bid

Billabong, the target of four failed takeover bids in 2012, said the proposed A$1.10-a-share cash offer from VF Corp. and Altamont Capital Partners matches an earlier bid from a group that includes private-equity firm Sycamore Partners, Bank of America BAC Merrill Lynch and ex-Billabong director Paul Naude.

In a statement to the Australian Securities Exchange, Billabong said it agreed to let VF and Altamont scrutinize its books while it weighs the offer. VF's brands include Nautica, The North Face, Timberland and Wrangler jeans.

The prospect of a takeover fight will likely fuel the optimism of Billabong investors who have seen shares hurt by the global slowdown, a strong Australian dollar that has diluted overseas income and the dwindling appeal of its core brands among young people.

Shortly before Christmas, the company cut its profit forecast in half, blaming weaker-than-expected trading conditions at its Americas and European divisions. For the current fiscal year, Billabong expects earnings before interest, tax, depreciation and amortization of A$56 million to A$63 million in constant-currency terms, down from a previous range of A$100 million to A$110 million.

Billabong shares have also come under pressure from a string of profit warnings and failed takeover offers.

In February, Billabong rejected a bid from U.S. private-equity firm TPG Inc. worth A$765.3 million. It later rejected a sweetened offer from TPG valuing the company at A$841.8 million.

Five months later, following a dilutive A$225 million capital raising at A$1.02 a share, Queensland-based Billabong granted TPG and rival Bain Capital due diligence at a lower offer price of A$1.45 a share. Both firms walked away after inspecting Billabong's books.

Billabong Chief Executive Launa Inman is implementing a "transformation strategy" aimed at increasing earnings before interest, tax, depreciation and amortization by about A$155 million by 2016 by closing less profitable outlets, making its products and stores more appealing, investing in its e-commerce platform and integrating its global supply chain.

Billabong shares closed Monday at 84.5 Australian cents a share, before the takeover proposal from VF and Altamont was announced.

Spokespeople for VF Corp. and Altamont couldn't be immediately reached for comment.  

 

Nomura analyst Nick Berry said a second bidder for Billabong lends weight to a deal being done, though TPG and Bain took a look at the company's books and walked away without cutting their offer price.

"On the other hand, Mr. Naude is an 'insider' and VF Corp. is a significant North American apparel manufacturer and brand owner, which lends a weight to both consortiums's A$1.10-a-share proposal that may not have necessarily been present in past nonbinding proposals," he said in a note. The offer from Mr. Naude and Sycamore Partners is backed by financing from Bank of America Merrill Lynch.  

Source: WSJ