Reuters – TPG Raises Concerns Over Billabong

(Reuters) – TPG Capital Management LP’s TPG.UL $700 million bid for Billabong International Ltd (BBG.AX) is still on the table, although the struggling Australian surfwear retailer needs to address some concerns raised by the private equity firm.

Texas-based TPG, the last remaining bidder for Billabong, was considering formally withdrawing its takeover bid after weeks of due diligence, the Australian Financial Review said earlier on Thursday, citing unidentified sources, sending the surfwear company’s shares tumbling by almost a fifth.

After the close of trade, Billabong said in a statement TPG had confirmed it had not withdrawn from the sale process but added “TPG and its advisers have expressed concerns in relation to some issues”.

“There is no guarantee that any transaction will eventuate out of the process,” the retailer said.

Shares in Billabong fell as much as 23 percent to A$1.015, their lowest in more than three months, and last traded down 18.3 percent at A$1.075 before being placed on a trading halt.

If TPG were to withdraw its offer of A$1.45 a share, and no other offer emerged, shareholders would be at the mercy of new Chief Executive Launa Inman’s recently outlined four-year plan to simplify the business in the hope of reviving falling sales and restoring profitability, analysts said.

“The likelihood of TPG not proceeding looks high based on today’s price action. The market tends to get it right,” said Peter Esho, an analyst at City Index.

“It goes from being a corporate play to … banking on management’s ability to deliver and restore trust,” he said.

Billabong has already conceded investors would have to wait two years for the biggest benefits of the new strategy to flow through.

TPG declined to comment on Thursday’s AFR report.

Only two weeks ago Billabong said another unnamed suitor had dropped out of bidding for the firm, leaving TPG as the sole interested party. Sources told Reuters the second bidder had been Bain Capital LLC.

While the company expanded aggressively, sales of its Billabong products, as well as brands Von Zipper and Element, weakened. Sales have declined in Europe, Canada and Australia, and the brand has lost much of its cachet with young shoppers.

The environment for retailers in Australia has been tough. Government figures on Thursday showed the nation’s retail sales rose just 0.2 percent in August from July, when they slipped 0.8 percent.

Billabong’s competitors include Quiksilver Inc (ZQK.N), Pacific Sunwear of California Inc (PSUN.O) and Zumiez Inc (ZUMZ.O).


Billabong, which in August reported its first annual loss since listing over a decade ago, snubbed a more generous TPG offer of A$3.30 a share in February.

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

Since the first approach from TPG, which has a 12.5 percent stake in the company, Billabong has sold half of its watch brand Nixon and raised A$225 million in equity to reduce debt.

Rival Australian surfwear company Rip Curl said last month it had received unsolicited approaches from several international companies wanting to invest in the privately held firm, in a deal that could fetch up to A$480 million.

($1 = 0.9553 Australian dollars)

(Additional reporting by Narayanan Somasundaram; Editing by Daniel Magnowski and Muralikumar Anantharaman)