Billabong turns to refinancing options as buyout talks falter
Embattled Australian surfwear company Billabong has discarded the possibility of a takeover by two PE-backed suitors and is now looking at asset sales and alternative means of refinancing its debt. The private equity firms involved in the bids – Altamont Capital Partners and Sycamore Partners – are in discussions with Billabong about participating in the refinancing efforts.
"The refinancing is intended to provide the company with a comprehensive solution and an appropriate capital structure, allowing it to continue its reform agenda," Ian Pollard, Billabong's chairman, said in a statement. "It's our intention to conclude these discussions as soon as practically possible while aggressively reducing costs across all our global operations."
The company added that weaker trading in Australia and losses incurred on SurfStitch Europe, a start-up it backed, meant it would miss previous profit projections for the current fiscal year. Billabong expects to post an EBITDA of A$67-74 million ($65-72 million), having said in February that A$74-81 million was a realistic target. This is its fourth profit downgrade since December 2012.
The company's stock resumed trading June 4 and had sunk 42% to A$0.26 by early afternoon.
Billabong's debt stood at A$279 million at the end of last year and efforts have already begun to reduce the burden. The company is looking to sell West 49, a 70-outlet retail chain in Canada, with Altamont and Sycamore said to be looking to participate in some way.
In April, Billabong announced that a consortium featuring Sycamore would enter into exclusive negotiations over a potential buyout. The consortium offered A$0.60 per share for all outstanding shares, valuing the company at A$287 million. This represented a substantial discount to the original bid, subsequently matched by a competing offer from Altamont Capital Partners and VF Corp, which valued Billabong at $527 million.
Back in February 2012, TPG Capital offered A$841 million, only to be rebuffed by shareholders. It returned six months later with a bid of A$694 million, which was matched by Bain Capital. Both subsequently withdrew after conducting preliminary due diligence.
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