Rival PE firm matches TPG’s $709m Billabong offer
A rival private equity firm – reportedly Bain Capital – has offered to match TPG Capital’s A$694 million ($709 million) buyout bid for Australian surfwear company Billabong International. The Billabong board maintains that neither offer reflects the fundamental value of the business in the context of a change of control transaction.
According to a regulatory filing, the new bid of "of around A$1.45 per share" in cash was received on September 5. The prospective private equity buyer has been granted the opportunity to conduct non-exclusive due diligence, which the Billabong board hopes will lead to an improved valuation and fewer conditions tied to the transaction.
TPG has also been given access to the company's books. It has said the due diligence process could lead to an increase or decrease in the offer price. Analysts at Citi previously suggested that there is a 50% chance of the private equity firm raising its offer to A$1.60 per share.
In addition to Bain, Rhone Capital, which owns 20% of rival surfwear company Quiksilver, has been touted as a potential bidder.
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. Last month Billabong announced plans to simplify its business by focusing on core brands, building out its global e-commerce platform and seeking supply chain efficiencies.
This came after the company 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.
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.
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