Billabong receives takeover bid from Altamont, VF Corp

Billabong said in a regulatory filing that it will also allow the Altamont-VF consortium to conduct non-exclusive due diligence. The board will simultaneously evaluate the bids and decide within six weeks whether they should be recommended to shareholders.

Billabong's shares were up more than 12% to A$0.95 during mid-afternoon trading on Tuesday.

The Sycamore consortium, which entered the fray after Naude temporarily relinquished his roles as a director and president of the Americas in order to hold discussions with potential backers, has lined up Bank of America Merrill Lynch as lead debt financer.

With cash flow from operations expected to hit $1.2 billion in 2012, VF Corp. appears to have sufficient firepower to cover a large portion of the rival bid. The company controls brands including The North Face, Lee, Wrangler, Vans, Timberland and Nautica.

However, an acquisition by Altamont-VF consortium would almost certainly signal the break-up of Billabong. VF is primarily interested in the Billabong brand, which is seen as a good fit with the company's action sports assets. Altamont, a San Francisco Bay Area PE firm with approximately $500 million under management and a focus on backing underperforming middle-market businesses, would seek to turnaround Billabong's other brands.

The Wall Street Journal drew parallels between Billabong and Timberland, which was acquired by VF in 2011 while struggling to manage rising raw materials, labor and transportation costs. Shortly before VF made its move, Timberland reported a 30% decline in net profit and its shares slumped by more than 25%.

Billabong 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. Adjusted EBITDA was down 40.9% to A$120.6 million.

The company projects an EBITDA of A$100-110 million for the 2013 fiscal year and wants the figure to reach at least A$210 million by 2016, largely based on a transformation strategy that will see the closure of less profitable outlets, a build-out of a global e-commerce platform, a renewed focus on core brands and the pursuit of supply chain efficiencies.

The most recent buyout offers are substantially lower than the A$694 million TPG Capital and Bain Capital were willing to pay in September. Both subsequently withdrew after conducting preliminary due diligence.

TPG originally submitted a bid of A$841 million in February only to be rebuffed. Billabong's stock then went into a downward spiral after a poorly received rights issue and deteriorating commercial performance.

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• Topics
• Consumer
• Buyouts
• Buyout
• Australasia
• Australia
• Consumer
• buyout
• Sycamore Partners
• Altamont Capital