SYDNEY — Private equity firm TPG Capital has formalized a takeover bid for Billabong International Ltd a week after it proposed a 3 Australian dollar ($3.21) per share offer to the Billabong board, valuing the company at 765 million Australian dollars, or $819.7 million at current exchange.
In a statement to the Australian Stock Exchange Monday morning, the Gold Coast, Queensland-based surf wear company announced it had received a non-binding, indicative offer from TPG Capital which “is subject to due diligence, subject to finance and conditional on a number of other matters.”
According to the announcement, “The board of Billabong will consider the proposal and advise shareholders of its views in due course.”
On Thursday, Billabong revealed it had received an initial 3 Australian dollar per share offer from TPG Capital — conditional on Billabong not selling any brand assets.
On Friday, however, Billabong announced it had reached an agreement to sell 48.5 percent of its Nixon unit to US equity firm Trilantic Capital Partners and an additional 3 percent of Nixon to Nixon’s own management for $285 million, which Billabong noted was needed to address the potential breach of its bank covenants. Billabong’s net debt is 526 million Australian dollars, or $563.6 million.
Billabong said Monday that the TPG takeover offer would not preclude the Nixon transaction announced on Friday.
The Nixon proposal was announced on the same day that Billabong revealed the results of a strategic capital structure review that was first flagged Dec. 19, when the company issued a shock profit downgrade in the wake of a sharp sales decline in November and December, particularly in Europe.
In addition to the partial sale of Nixon, the company proposed 30 million Australian dollars, or $32 million, of cost-cutting measures, including the closure of 100-150 stores — or 15 to 22 percent of its network — and 400 fulltime job cuts (80 in Australia); as well as a reduced dividend payout ratio for the full-year 2012 to approximately 25 percent.
Following Monday’s announcement, Billabong shares jumped as much as 30 cents, or 11 per cent, to 2.92 Australian dollars, valuing the company at about 740 million Australian dollars, or $793.9 million. Prior to the December downgrade, Billabong stock was worth over 4 Australian dollars. This time in 2011, the shares traded as high as 8.55 Australian dollars.
Billabong is the latest high profile Australian target in TPG’s sights, following its 1.4 billion Australian dollar [$1.2 billion at the time] takeover of the Myer department store chain, which it sold out of in 2009. In 2007, TPG was also part of a consortium in a failed multi-billion dollar takeover of Australia’s national airline Qantas.