Reuters – Bain Matches $700M Offer for Billabong

(Reuters) – U.S. private equity firm Bain Capital LLC has matched a $700 million takeover offer for Australia’s Billabong International Ltd (BBG.AX) from TPG Capital TPG.UL, sources familiar with the matter said, improving the odds the struggling surfwear brand will agree to a sale.


Billabong, which last week posted its first annual loss since listing more than a decade ago, announced that a new party had offered around A$1.45 a share late on Wednesday, equivalent to TPG’s July offer valued around A$694 million ($707 million).


The two bidders are expected to spend several weeks assessing Billabong’s finances before updating the offers, possibly revising the bid price.


The heightened attention from private equity, after Billabong lost nearly half its market value in six months, gives the fading brand a chance to soothe investor anger that it snubbed a more generous A$3.30 a share offer in February and then issued a string of bad earnings news.


“We don’t really think there’s a whole lot in it at this point,” said Jason Beddow, managing director of Argo Investments, which manages A$3.5 billion and has a small stake in Billabong.


“As a Billabong shareholder you ultimately hope both decide they want it and they get in a bidding war and it’s all exciting. But let’s face it — the business is struggling.”


“It may be more competitive with someone else looking but … it is hard to see people getting too excited and overpaying for it,” he said.


Billabong spokesmen declined to name the new bidder but two sources who asked not to be named told Reuters the fresh suitor was Bain Capital LLC. A spokeswoman at Bain declined to comment.


Billabong, which rejected an A$3.30 a share offer from TPG in February as too low, said it did not think the current twin offers reflected fundamental value. Still, it has granted due diligence to both parties and said it was now actively seeking a price and terms it could recommend to shareholders.


“It puts the pressure back on the board. Maybe they should consider it,” said David Spry, research manager at brokerage F.W. Holst.


“It’s a tired brand. They’ve got lot of work to do.”




Billabong, which had undertaken an aggressive expansion, has been struggling with weak sales of its namesake brand as well as Von Zipper and Element.


It dumped its chief executive in May after several profit downgrades and appointed Launa Inman who previously headed the discount chain Target, owned by Wesfarmers (WES.AX).


Sales have declined in Europe, Canada and Australia, and the brand lost much of its cachet with young shoppers. Its competitors include Quiksilver Inc (ZQK.N), Pacific Sunwear of California Inc (PSUN.O) and Zumiez Inc (ZUMZ.O).


Shares in Billabong jumped 9 percent to their highest in three weeks after resuming trade on Thursday and ended the day at A$1.365, up 7.5 percent but still below the price of the two tentative offers as doubts remained about their prospects.


U.S.-based TPG Capital Management LP offered A$1.45 per share for Billabong on July 24, and said it could raise or lower its price after it has seen Billabong’s books.


Spry said the offer may get up to A$1.60 but would hit a ceiling around there.


“This is certainly not a quick fix. They are just an ordinary brand now, run of the mill,” he said.


Both offers are indicative, non-binding and conditional, and the price may be refined after perusal of Billabong’s books.


Since the first approach from TPG, which has built up a 12.5 percent stake after winning over two institutional shareholders, Billabong has sold half of its watch brand Nixon and raised A$225 million in equity to reduce debt.


The company last month outlined a four-year plan to simplify its business and revive sales, although it conceded investors would have to wait two years for the biggest benefits to flow through.


“We are just basically waiting and if someone buys it for A$1.45, we’ll get an extra 9 cents. It’s a nothing investment now,” said Beddow.


($1 = 0.9823 Australian dollars)


(Additional reporting by Narayanan Somasundaram and Victoria Thieberger; Editing by Edmund Klamann)

Image Credit: Billabong