Billabong opens its books to TPG, says buyout offer too low
Billabong International's board has agreed to let TPG Capital conduct due diligence on the company, although it maintains that the private equity firm’s A$694 million ($712 million) buyout offer is too low in the context of a control transaction. TPG’s previous offer of AS$841 million, made in February, was also rejected but Billabong’s stock price has fallen substantially since then.
Billabong's board said the most recent offer is "based solely on available public information and may be refined with the benefit of due diligence." It added that opening the company's books for inspection was being done with a view to TPG ultimately reducing the conditions attached to its bid and improving the valuation.
The private equity firm offered to pay A$1.45 per share in cash on Tuesday, a 32% premium to the previous 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.
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 a recent rights issue.
Following TPG's previous bid, Billabong pledged to close down stores and spin out Nixon, one of its most profitable brands, into a joint venture with Trilantic Capital Partners in order to reduce debt levels. The rights issue, which took place in June, cut net debt from A$325 million to A$100 million, but investors weren't convinced by the company's business prospects and the stock tumbled.
It was reported at the time 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.
Goldman Sachs is providing financial advice to Billabong, while Allens is serving as legal counsel.
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