NEW YORK — Australian swim and apparel company Billabong International Ltd. has acquired Honolua Surf Co., described by Billabong chief executive officer Derek O’Neill as an emerging brand with significant potential.

Billabong said it will pay between $10 million and $15 million for the acquisition, which will be funded by debt and paid in two installments. Honolua, based in Lahaina, Hawaii, will receive an initial payment that is 75 percent of the agreed purchase price, and after three years it will receive 25 percent of the initial purchase price plus an incentive-based payment calculated on the increase in retail profits over the period. Billabong said it expects the acquisition to be positive on earings per share.

“This is an attractive acquisition for us because it slots so readily into our existing base of skills and experience,” O’Neill said. “We also see important opportunities to further expand Honolua through our existing international distribution network.”

The purchase includes Honolua’s existing retail operation of 17 stores in Hawaii and two in Las Vegas. The merchandise in its stores is primarily the Honolua brand, although Billabong is among its other suppliers.

Honolua’s co-founders, Tom Knapp and Randy Blumer, also will receive an annual payment over three years based upon continuing employment. Both men are slated to stay with the company.

This story first appeared in the January 8, 2004 issue of WWD. Subscribe Today.