Billabong says TPG talks continue despite diligence concerns

"Billabong advises that TPG has confirmed it has not withdrawn from the sale process," the Australian surfwear company said in a statement. "As part of its due diligence, TPG and its advisors have expressed concerns in relation to some issues, however, discussions in relation to those matters are continuing."

Last month, Bain Capital withdrew an indicative offer equal to TPG's bid of A$1.45 per share in cash, after spending a fortnight conducting due diligence.

The share slump was prompted by a report in The Australian Financial Review that TPG was considering its position due to concerns about Billabong's medium-term earnings forecasts and the health of the core Billabong brand. It implied that the business is in so much distress even a proven turnaround specialist like TPG doubted its ability to deliver.

By opening its books to the private equity firm, Billabong's board hopes to secure an improved valuation and fewer conditions tied to the transaction. For its part, TPG has said the due diligence process could lead to an increase or decrease in the offer price.

Prior to its latest A$694 million offer, TPG submitted a bid of A$841 million for Billabong in February. The steep drop reflects the fall in the company's share price following the weak response to a rights issue intended to help pay down a large debt pile.

Billabong embarked on an aggressive expansion strategy but sales are struggling in the face of tough competition and a weak retail environment. The company has begun executing plans to simplify its business by focusing on core brands, building out its global e-commerce platform and seeking supply chain efficiencies.

This comes after it posted 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. Financial performance was affected by 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 arising from the spinout of the Nixon brand into a joint venture with Trilantic Capital Partners.

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