Australian surfwear company Billabong International received a $556 million bid, the latest takeover play in a tumultuous year in which three previous offers withered, but its shares fell sharply on Wednesday as it cut its earnings forecast, Reuters reported. A consortium led by director Paul Naude and New York-based Sycamore Partners offered A$1.10 per share, a 12 percent premium to the stock’s last trade before a trading halt on Monday.
(Reuters) – Australian surfwear company Billabong International received a $556 million bid, the latest takeover play in a tumultuous year in which three previous offers withered, but its shares fell sharply on Wednesday as it cut its earnings forecast.
A consortium led by director Paul Naude and New York-based Sycamore Partners offered A$1.10 per share, a 12 percent premium to the stock’s last trade before a trading halt on Monday.
But shares in Billabong, which rejected a much higher takeover offer in February, plunged 11 percent to A$0.87 as the company cut its earnings guidance by about 15 percent.
“Billabong has undergone a lengthy period of extraordinary corporate activity and … I understand the concerns of shareholders,” said Ian Pollard, Billabong Chairman since October.
The proposal came with a condition that it would be withdrawn immediately if confidentiality is lost for any reason, a company statement said.
Perennial Value Management, which holds around 9 percent of Billabong, was willing to accept the latest offer, media reported. Perennial was not immediately available for comment.
Billabong shares, which traded above A$2.50 a year ago, had hit a two-month high on Monday after a media report revealed the Naude-led takeover offer of A$527 million ($556 million).
The consortium involves Naude as “cornerstone equity investor” and Bank of America Merrill Lynch as lead debt financier, Billabong said.
“It’s not much of a premium but it might just be an opening salvo,” said Cameron Peacock, strategist at IG Markets.
Naude stood aside from his role as president of Billabong’s Americas operations in mid-November for six weeks to look at putting together a buyout proposal.
Due diligence is expected to take four to six weeks. The board would consider the proposal and update the market “as it seeks to restore the fortunes of the company,” Pollard said.
Billabong cut its forecast for full-year underlying earnings to a range of A$85-$92 million before interest, tax, depreciation and amortization (EBITDA) in constant currency terms, excluding one-off items of A$29 million.
That was down from an August forecast for A$100 million to A$110 million.
Canada same-store sales had seen high single-digit declines in October and November and that trend was expected to continue for the next six months. Orders for its Dakine and Element brands were softer and Brazil had not met forecasts.
In Europe, cancellations of winter orders were up and sales and gross margins had missed forecasts, the company said.
New chief executive Launa Inman has outlined a four-year turnaround strategy to simplify the business and close stores, hoping to turn the tide after a year of profit downgrades.
Pollard said the Board supported Inman’s transformation strategy, but would assess the takeover proposal.
The surfwear maker and retailer, whose brands also include its namesake brand and Von Zipper, was initially approached by private equity firm TPG Capital in February but rebuffed an offer of A$3.30 a share, opting instead to sell half of its watch brand Nixon and raise A$225 million in equity to reduce debt.
Sales, and the shares, continued to sag and TPG returned with a reduced A$1.45 per share bid in July.
Rival buyout firm Bain Capital came in with a matching bid in September, only to drop out two weeks later. TPG withdrew its second offer in October.
Goldman Sachs is advising Billabong.