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Billabong founder open to takeover offer

27 Jun 2012

Gordon Merchant, the founder of beleaguered Australian surfwear brand Billabong, has said he is open to another takeover bid after shunning global buyout giant TPG Capital’s offer earlier this year.

Merchant, who also owns more than 15 per cent of the business, told the Australian Financial Review (AFR) he was open to an offer of lower than A$4 per share, despite saying in February he would not accept an offer of less than that amount.

“I thought it was the right decision at the time . . . No one has lost more money than I have. I don’t have any set figure in my head, but I would consider [a lower offer than $4 a share],” he told the AFR on Tuesday.

The company on 13 March said TPG’s third offer of A$3.30 ($3.55) per share – equivalent to A$841m ($904m) – for the company was still too low, following its previous rejection of a $3.00 per share offer tabled the previous day .

The news follows an initial offer submitted by TPG before market opening on Monday 20 February. Billabong has since held a number of discussions with TPG to give it the opportunity to increase its proposed price to better reflect the value of the company.

The initial offer, which represented a premium of just 14.5 per cent and values the company at A$765.3m ($823m), came just days after Billabong agreed to sell a 48.5 per cent stake in sports watch subsidiary Nixon to Trilantic Partners, in a move that temporarily recapitalised the struggling surfwear maker.

A structural review of Billabong released at the beginning of March revealed the business – which operates through a global network of 677 stores – plans to close between 100 and 150 loss-making and under-performing outlets to reduce rent expense and increase EBITDA, resulting in the loss of around 400 jobs.

Billabong’s forecast first-half net profits are expected to halve to around A$25m ($27m), following a sharp decline in sales in November and December. The company suspended trading earlier, citing a ‘strategic capital structure review’ announced in December.

Australian companies outside of the mining industry have recently struggled under the weight of a strong Australian dollar, high interest rates and cost-conscious consumers, attracting interest from private equity firms around the world.

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