SYDNEY — Billabong International Ltd has failed to reach an agreement with its two latest takeover suitors — as its shares plunged to a new record low.
The Burleigh Heads, Queensland-based surfwear manufacturer said Tuesday that "change of control discussions with the Sycamore Consortium and the Altamont/VF Consortium have now concluded."
The company also announced that is currently in discussions with Altamont Capital Partners and Sycamore Partners regarding proposals for alternative refinancing and asset sale transactions, the proceeds of which would be used to pay down in full the company's existing debt [of 279 million Australian dollars as of December 2012, or $270 million at current exchange]. According to the statement — and confirming recent reports — 70-unit Canadian retail chain West 49 is one potential asset sale.
No period of exclusivity has been granted to either party the company said.
"The Refinancing is intended to provide the Company with a comprehensive solution and an appropriate capital structure, allowing it to continue its reform agenda," said Billabong Chairman Ian Pollard in the statement. "It's our intention to conclude these discussions as soon as practically possible while aggressively reducing costs across all our global operations."
In December, the Sycamore Consortium offered 1.10 Australian dollars per share, or $1.16 at rates for the period, and commenced due diligence in early January. That bid was matched by the Altamont/VF Corp Consortium in mid January.
In early April both bidders dramatically lowered their bids to 60 and, reportedly, 50 Australian cents respectively.
Tuesday's statement also included yet another new profit downgrade, from 74 to 81 million Australian dollars, or $72 to $78 million, announced in February, to now between 67 to 74 million Australian dollars, or $65 to $72 million, blaming poor sales in Australasia and Europe and a larger-than-expected 4 million Australian dollar ($3.87 million) e-commerce startup loss in the SurfStitch Europe site.
The Sycamore and Altamont/VF consortia were the third and fourth suitors to walk away from a Billabong deal over the past nine months after gaining access to the company's books and analysts do not rate the chances of any more bids.
"It would have to be an absolute white knight to come out of nowhere and make another offer" said Evan Lucas, a market strategist at IG.
"The absolute worst case scenario would be if their asset value drops below their loans, the banks are going to come calling" he added. "I don't think they'll be able to go back to the market [to refinance]; that will dilute them too much. I think they will have to look at de-listing and walking away and privatizing themselves. The board is going to have a hell of a time of doing that, but it will give them clearer air than being publicly-listed. That way at least they do not have to worry about any sort of equity performance, they have to worry about debt and debt only".
Billabong's shares were the worst performer of the day on the Australian Securities Exchange, plunging 49.45 percent to close at 23 Australian cents, or $0.22 cents, on Tuesday.
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