SYDNEY — Billabong International Ltd. has granted due diligence to a consortium led by its executive director and president of the Americas operations, Paul Naudé — and the market is divided as to its prospects.
Shortly after the Gold Coast, Queensland-based surfwear manufacturer announced that Naudé, private-equity group Sycamore Partners Management and Bank of America Merrill Lynch had made a 1.10 Australian dollar a share offer, or $1.14 a share offer, or $1.14 a share at current exchange, valuing the company at just less than 527 million Australian dollars, or $546 million — Billabong stated that it had reviewed the proposal in detail and that due diligence is expected to take up to six weeks.
“The board of Billabong reiterates that there is no guarantee that, following a period of due diligence by the consortium, an acceptable, binding proposal will be forthcoming,” said the statement to the Australian Securities Exchange. Unlike other ASX statements regarding the year’s previous Billabong offers, however, no mention was made of the 1.10 Australian dollar proposal undervaluing the company in a change-of-control context, a point that numerous analysts believe could be significant.
The Naudé-Sycamore proposal is the fifth takeover offer received by Billabong in 2012, after TPG Capital’s earlier bids of 3.00, 3.30 and 1.45 Australian dollars (or $3.12, $3.43 and $1.51), with the latter matched in September by Bain Capital. Both TPG Capital and Bain Capital later withdrew their offers after commencing due diligence, citing undisclosed “issues” with the company’s books.
As 2012 ended, Billabong’s stock was trading at 86 Australian cents, or 89 cents — well below the 1.10 offer.
In a Dec. 19 ASX statement covering the Naudé-Sycamore bid, Billabong announced its third profit downgrade in twelve months, prompting both Citibank and UBS to downgrade Billabong’s stock to neutral from buy and J.P. Morgan to cut the stock to underweight from neutral.
“It’s not encouraging at all,” said IG Markets analyst Stan Shamu. “Investors lose confidence quite quickly in this environment. Management knocked back a few takeover bids at higher prices, now they’re scrambling for 1.10. If this takeover doesn’t get through, I think it could get materially worse, just looking at some of the recent comments by brokers following the profit warning. It seems the stock would be trading at a much lower price if it wasn’t for the takeover offer underpinning the price.”
Deutsche Bank has predicted a 45 percent probability that a 1.10 deal will be successful. One Sydney broker, who declined to be named, put the odds at 50-50.
“Given the share price, the market is not proposing a huge probability of it going ahead,” said the broker. “But if Naudé and his syndicate actually come up with a firm bid, I personally think that the board will have to accept it, even though they knocked bids back from two private-equity companies before, and if you said no at 1.40 [$1.45], they’re going to look like absolute clowns. I think they’ve almost been put in a corner here. They haven’t said straight out it’s undervalued, and given that Naudé is heading up the bid, when you talk about due diligence, it’s hard to imagine he’s going to find something he doesn’t know. Having Naudé there is, I think, encouraging, because nobody knows the company like he does. He’s been there long enough. It’s going to take a long time to turn this business around. But I think the guys taking it over will make a lot of money.”
EXCLUSIVE: @tomford is opening its first-ever beauty store. The boutique, which opens November 20 in London’s Covent Gardens, was designed with the over-the-top glam Ford is known for. Read the full story on WWD.com, link in bio. #wwdbeauty #wwdnews (📷: Simon Wagner) #TomFordBeauty
New York-based DJ @harleyvnewton threw a party to celebrate the holiday collection of her dress and pajama line @hvn at the Ladurée Beverly Hills. It Girls @katebosworth, @rashidajones and more joined in on the fun, which included cocktails, croque monsieur sandwiches and a photo booth. #wwdfashion (📷: Owen Kolasinski/BFA.com)
For the holidays, @Burberry partnered with 20-year-old artist @blondeymccoy on a series of three outdoor murals in downtown Manhattan. The murals are McCoy’s interpretation of a Christmas eve party, the idea of charity and the spirit of family. His third mural, pictured here, is the most personal. The image depicts McCoy’s grandparents and father in London’s Trafalgar Square in the Seventies. “My work often features lots of sentimental objects.” #wwdeye
For spring 2018, designers applied bold colors and cartoonish motifs on everything from sneakers and belts to key chains. See all the top men’s accessories trends on WWD.com. #wwdtrends (📷: George Chinsee; Prop Styling by @rnasti; Market Editor: @luiscampuzano)
The @dior-sponsored @guggenheim international gala pre-party has a history of drawing cool-girl musical acts to serenade the crowd –– and last night was no exception. @haimtheband performed songs both new and old, and lured a star-studded audience with the likes of Rebecca Hall, Kate Mara, Mamoudou Athie and more. #wwdeye (📷: @lexieblacklock)
In a partnership between the @metopera and the @englishnationalopera, “Marnie” was born. The opera, with costumes sponsored by @mrporterlive, is an adaptation of the 1961 thriller by Winston Graham. Arianne Phillips, who created the costumes, is no rookie: She’s styled Madonna for her tours and created costumes for a myriad of films in the past. Read WWD’s interview with Phillips, where she talks about her inspiration for the opera’s costumes on WWD.com #wwdfashion
@barneysnyc took a different approach to their holiday windows this year. Instead of Christmas decor, Barneys tapped @thehaasbrothers to tell a story of positivity, gratitude and inclusivity via heartwarming silliness and humor. “It’s about kids and it’s about coming together and being family and loving each other,” said Simon Haas. #wwdfashion (📷: @joshuascottphoto)
Beauty influencer @kandeejohnson makes her foray into hair care with a collaboration with @ogx_beauty — making it the first time that OGX has teamed up for a product creation. The collab includes shampoos and conditioners in three scents. At 39 and a mom, Johnson is a different profile than the emerging social media stars, but is considered one of the pioneers of the digital beauty influencer world. Read WWD’s interview with her on wwd.com, including the strangest beauty product she’s ever tried #wwdbeauty