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Billabong Said to Get A$694 Million Bid From Bain to Rival TPG

By Angus Whitley & Brett Foley - 2012-09-06T01:33:45Z

Billabong International Ltd. (BBG) received a A$694 million ($707 million) offer from Bain Capital Partners LLC, said people familiar with the matter, setting up a possible bidding war with rival suitor TPG International LLC.

Bain, a Boston-based private equity firm, has started studying Billabong’s financial records, two people with knowledge of the process said, declining to be identified as the information is private. The surf-wear maker said in a statement today that the A$1.45-a-share conditional cash bid matched TPG’s offer, without naming the second suitor.

Billabong jumped in Sydney trading after saying neither offer is sufficient and it’s allowing due diligence in an effort to draw a higher bid. Gold Coast, Australia-based Billabong last month posted its first loss since its initial public offering 12 years ago on writedowns and falling sales.

“It’s great news for shareholders of Billabong because it adds pricing tension,’ said Tim Montague-Jones, senior equity analyst at Morningstar Inc. (MORN) ‘‘The probability is quite high that a higher offer could come through. A deal could get done.”

Shares of Billabong rose 7.9 percent to A$1.37 at 11:08 a.m. local time, posting the biggest intra-day gain since July 24 and swelling the company’s market value to A$656 million. The stock reached a record high of A$17.67 in 2007.

TPG, the buyout firm run by David Bonderman, started due diligence on Billabong in late August, according to the Australian company.

‘Fundamental Value’

Neither offer “reflects the fundamental value of Billabong in the context of a change of control transaction,” the retailer said in its statement. There’s no guarantee the bidders will produce a bid that Billabong’s directors can recommend to shareholders, the company said.

Billabong said July 24 that TPG’s bid “may be refined” following due diligence. Colonial First State Investment Ltd. and Perennial Value Management Ltd. agreed to sell about 12.5 percent of Billabong’s issued capital to Fort Worth, Texas-based TPG, Billabong said July 24.

Billabong in February rejected an offer of A$3.30 a share from TPG. Founder and largest shareholder Gordon Merchant, together with director Colette Paull, said they wouldn’t consider a bid of less than A$4 a share.

Even after making offers beneath that threshold, the private equity firms have been granted access to Billabong’s books following a slump in sales and operating losses in Australasia, Europe and the Americas. Billabong has been forced to cut jobs and sell items at a loss to clear stockpiles, as it racked up charges for closing store leases early.

To contact the reporters on this story: Angus Whitley in Sydney at awhitley1@bloomberg.net; Brett Foley in Melbourne at bfoley8@bloomberg.net

To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net

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