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TPG returns with new Billabong proposal

by Laura Board | Published July 24, 2012 at 7:59 AM

TPG Capital late Monday, July 23, returned with a cut-price, A$694.6 million ($715 million) offer for Australia's Billabong International Ltd., five months after the struggling board sports clothing and equipment maker had sent the buyout firm packing.

TPG made a conditional cash proposal worth A$1.45 per share, down from its previous bid of A$3.30, though Billabong has since expanded its share capital through a rights issue.

The new proposal carries various conditions, including financing, gaining the Billabong board's backing, securing regulatory approvals and its target's net debt not rising significantly above the A$100 million guidance delivered as of June 21, Billabong said Tuesday.

The Fort Worth, Texas investor has the backing of Colonial First State Investment Ltd. and Perennial Value Management Ltd., which together hold 12.5% of Billabong and are the two largest institutional shareholders, the target added. It promised to update the market once it has reviewed the bid.

Billabong's brands include Element, VonZipper, Honolua Surf Co. and Tigerlily. Since TPG last walked away, the Gold Coast, Australia-based company hired Laura Inman as CEO to replace Derek O'Neill, issued a new profit warning, and raised A$225.4 million in a share sale which closed Monday and which attracted only a 51% take-up among retail investors. The rights issue expanded Billabong's shares in issue by 86%.

Billabong shares Tuesday rose 20% to A$1.32. TPG's approach represents a 32% premium to Monday's A$1.10 closing price. Billabong sold the new shares at A$1.02 apiece.

Under TPG's proposal Billabong founder Gordon Merchant, who owns about 17% of the company, and Colette Paull, one of Billabong's earliest employees, will have the right to roll their shareholdings into a new vehicle. Both had opposed TPG's earlier approach but Merchant Tuesday was reported to be open to the new proposal.

TPG's sweetened February proposal had valued Billabong's share capital at A$841.8 million.

TPG made its Australian debut in May 2006 with the A$1.4 billion consortium purchase of department store operator Myer Pty Ltd., which it exited in 2009 via an initial public offering, triggering a tax dispute with Australian authorities. Its other local portfolio companies include healthcare provider Healthscope Ltd., which TPG manages from its Melbourne, Australia, office.

Billabong's advisers are Goldman, Sachs & Co. and law firm Allens.

Nonexecutive directors Merchant and Paull previously took advice from Bruce Cowley at law firm Minter Ellison.

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TPG returns with new Billabong proposal

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