Billabong former US head and Sycamore Partners table $300 mn takeover bid

A consortium led by the former US head of Billabong International has lowered its indicative takeover offer for the Australian surfwear company by 45 per cent to $300 million.

Paul Naude, director and president of Billabong's US unit and private equity firm Sycamore Partners has tabled a A$0.60 per share offer, while a rival consortium made up of private equity firm Altamont Capital Partners and US clothing group VF Corp is reported to have offered less than A$0.50 per share.

With a superior indicative offer, Naude will now enter 10 days of exclusive talks with the struggling surfwear retail giant.

The latest offers are below half the A$1.10 initial bids made by both Naude and rival Altamont Capital which had then valued the company at A$527 million ($550 million) and is less than one-third of the $904 million offered by TPG Capital in February 2012.

The offer from Naude includes the option for shareholders to accept shares in a company to be incorporated by Sycamore, which will make a formal takeover offer.

Billabong shares, which have been placed in a trading halt until the company makes an announcement on the takeover offers, has lost around two-thirds of its value in the past year. Last month its stock plunged to an all-time low of A$0.63.

Gordon Merchant, Billabong's founder and largest shareholder with a 15.6-per cent stake, who had earlier rejected TGP's offers, plans to accept Naude's offer in the absence of a higher bid. 

Billabong's two largest institutional shareholders, Colonial First State Investment and Perennial Value Management with a combined 12.5 per cent stake, may also tender their shares to a firm offer from Naude.

Debt-laden Billabong had in February 2012 rejected TPG Capital's offer of A$3.30 a share or $904 million.

In July, TPG came back with a revised lower offer of $1.45-a-share or A$694 million, since after its first approach, Billabong sold 48.5 per cent of its watches and accessories company Nixon to Trilantic Capital Partners for $A432.71 million.

In early September Billabong received a matching offer from an unnamed second suitor, which the media had speculated was Bain Capital, but after inspecting the Queensland-based company's books, it also withdrew its bid.

After rejecting TPG's initial offers, Billabong announced a major restructuring that included job cuts and the partial sale of its watches and accessories company, Nixon, cutting production lines, and expanding its online business

Under the restructuring, Billabong, which had 634 stores in Australia, Europe, and the Americas, has already closed 58 stores and is expected to shutter another 82 this financial year, most of which were set up two years back.

In order to raise money to pay debts of more than A$500 million, of which, A$484 million is due in 2013 and the remainder matures in 2014, Billabong sold Nixon and  came up with an A$225 million equity raising.

Apart from the Billabong brand, the company sells surfwear and accessories under the Palmers Surf, Honolua Surf, Swell.com, Von Zipper, Kustom (footwear), Nixon, Xcel Wetsuits and Tigerlily brands, and also Element skate clothing and hardware.

Billabong's products are licensed and distributed in more than 100 countries and are available in approximately 11,000 stores worldwide. Products are distributed through specialised boardsports retailers and through the company's own branded retail outlets.

The majority of it's A$1.4 billion revenue is generated through wholly-owned operations in Australia, North America, Europe, Japan, New Zealand, South Africa and Brazil.