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Billabong Talks With Suitors Continue

The revised bids for the Australian firm are around half of the initial nonbinding offer.

Billabong International Ltd. is still in talks with its two suitor groups, although revised bids have been lowered substantially from their initial nonbinding offers.

Back in December, a consortium led by Paul Naudé, president of Billabong’s U.S. business, offered 504.9 million Australian dollars, or $555.3 million, at the December exchange rate. The consortium includes U.S. private equity firm Sycamore Partners. The Naudé offer is for 1.10 Australian dollars, or $1.16, a share. In January, VF Corp. and Altamont Capital Partners also made an offer for Billabong, matching the existing offer on the table.

According to financial sources, the revised bid from Sycamore is closer to between 55 to 60 Australian cents a share, while the one from VF is slightly below 50 Australian cents. That would place the higher offer at a total valuation of 286 million Australian dollars, or $298.4 million, at current exchange, and the low bid at 239 million Australian dollars, or $249.4 million.

Both per-share bids are lower than the last trade for Billabong shares, which was 73 Australian cents on March 28 when trading was halted pending acquisition talks.

The difference between the two offers is that the VF-Altamont bid would split the company in two, with VF taking the Billabong brand and Altamont interested in Billabong’s other assets.

The decline in the offers isn’t a surprise. The surfwear firm in February posted a first-half loss of 537 million Australian dollars, or $550.19 million, for the period ended Dec. 31, against a 16.1 million Australian dollar, or $16.5 million, profit a year ago. The loss at the time was larger than Billabong’s market cap, which in February was 421.5 million Australian dollars, or $432 million.

There have been prior offers for Billabong, four from TPG and one from Bain Capital, both U.S. private equity firms, at higher amounts than those currently on the table. For example, Billabong in February 2012 rejects TPG’s third takeover attempt for 3.30 Australian dollars, or $3.53, a share. TPG’s fourth offer and the one from Bain for $1.45 Australian dollars were later withdrawn.

Shares of Billabong are still halted due to ongoing negotiations with the two bidders.