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Billabong, Sycamore talk lower bid

by Paul Whitfield | Published April 10, 2013 at 9:26 AM

Australian sports clothing maker Billabong International Ltd. said Tuesday, April 9, it will enter exclusive talks with a consortium led by New York's Sycamore Partners LLC after it received a cut-price cash-and-share offer valuing its equity at about A$287 million ($298 million).

Gold Coast-based Billabong said Sycamore had bid A$0.60 per share and would offer stock in a new bid that will equate to at least 15% to 24.9% of Billabong's equity.

The offer is 45% lower than an earlier A$1.10 indicative offer made by Sycamore prior to due diligence. That bid was matched by a competing consortium led by Greensboro, Calif.-based clothing maker VF Corp. and backed by Altamont Capital Partners of San Francisco.

Billabong said it will "conduct a process to evaluate whether a change of control proposal, at a price and on terms that the board would recommend," can be secured.

Sycamore has teamed with Billabong's head of Americas Paul Naude to make its bid. The offer is conditional on Billabong's largest shareholders, Gordon Merchant and Colette Paul, electing to receive shares in the new bid company in return for at least 15% of their total 16% holding in Billabong. Merchant and Paul said they will back the bid in the absence of a better offer.

Billabong has received at least five takeover offers in a little over a year since TPG Capital fired the starting gun on takeover talks with an indicative A$3.30 per share bid in February 2012. That offer, worth a total A$850 million, was rejected by the company as too low.

Subsequent bids for Billabong have progressively fallen as the company issued a series of profit warnings and after bidders were given access to its books. TPG in late 2012 returned with a new offer of A$1.45, while Bain Capital LLC also briefly considered a bid at about that level.

The surfing clothes maker issued three profit warnings over 2012, and in February posted a net loss of A$537 million as it absorbed the costs of restructuring and closing stores after sales in Australia, Canada and Europe dipped. Its brands include Element, VonZipper and Tigerlily.

Billabong shares have lost just over 74% of their value in the past year. The stock has been suspended since March 28, when it last traded at A$0.73.

Billabong is taking financial advice from Goldman, Sachs & Co. Its legal counsel is Allens.

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