TPG resumes Billabong pursuit with $712m buyout offer

Billabong jumped nearly 21% to A$1.33 in morning trading but it is still down 78% on a one-year basis, with much of the damage coming in late June following a heavily discounted rights issue. At the time it was reported that Gordon Merchant, the company's founder and major shareholder who opposed TPG's initial advances, recognized that some kind of rescue deal is inevitable.

TPG has offered to pay A$1.45 per share in cash, a 32% premium to Monday's closing price. The offer is conditional on Billabong retaining ownership of all its current brands and the company's net debt position not being materially different from the stated level of A$100 million. In order to pay down debts and resist TPG's previous takeover bid, Billabong agreed to spin out Nixon, one of its most profitable brands, into a joint venture with Trilantic Capital Partners.

Colonial First State Investment and Perennial Value Management have already agreed to sell TPG shares amounting to 12.5% of Billabong's total issued capital after allocations made under the recent rights issue.

Shortly before the rights issue, which reduced net debt from A$325 million to A$100 million, Billabong downgraded its EBITDA expectation for 2012 to A$130-135 million from slightly above the analyst consensus of A$157 million, citing "the prolonged and ongoing deterioration in trading conditions."

Billabong has more than 700 stores worldwide and operates brands including Element, Von Zipper and Tigerlily, as well as Nixon. It has been struggling commercially due to deteriorating sales in Europe and Australia, intense competition and rising raw material costs.

A number of private equity firms are seeking take-private deals in Australia, responding in part to lower public market valuations. Pacific Equity Partners (PEP) secured the A$720 million buyout of cleaning and catering services contractor Spotless at the end of April. In the last fortnight, Crescent Capital has offered A$220 million for Clearview Wealth and CHAMP Private Equity agreed to buy Gerard Lighting Group for A$186 million.

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• Topics
• Consumer
• Buyouts
• Australasia
• TPG Capital
• buyout
• Australia
• Consumer