Billabong still in talks with TPG, presents turnaround strategy
Australian surfwear company Billabong International is understood to be continuing discussions with TPG Capital over a A$694 million ($723 million) buyout offer, even as it unveiled a turnaround strategy regarded as a move to preserve its current status.
The private equity firm's most recent bid came in July and is substantially lower than an earlier offer made in February of A$841 million. Billabong maintains that TPG's valuation is too low, but the steep drop is a reflection of the fall in the company's share price following the weak response to a rights issue.
The turnaround strategy comes as Billabong announced a net loss of A$275.6 million for the 2012 fiscal year, compared to a profit of A$119.1 million 12 months earlier. The company noted the significance of one-off charges of A$336.1 million, including the closure of underperforming stores and impairment charges. This is net of a A$201.4 million gain - 99% of it non-cash - arising from the spinout of the Nixon brand into a joint venture with Trilantic Capital Partners.
EBITDA for the period was A$130.4 million, down 32.1% year-on-year. Billabong expects the challenging trading conditions to continue during the current fiscal year, with EBITDA projected to reach $100-110 million. The company plans to simplify its business by focusing on core brands, building out its global e-commerce platform and seeking supply chain efficiencies.
Analysts at Citi said last week that there was a 50% chance of TPG raising its offer price to A$1.60 per share - up from A$1.45 - after completing due diligence.
If the deal goes through, it would be the latest in a string of PE-backed take-private deals in Australia, responding in part to lower public market valuations. Offers have met with a mixed response from management.
Pacific Equity Partners (PEP) secured the A$720 million buyout of cleaning and catering services contractor Spotless at the end of April after months of prevarication. Crescent Capital offered A$220 million for Clearview Wealth but was rebuffed by the board, while CHAMP Private Equity agreed to buy Gerard Lighting Group for A$186 million.
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