Billabong International Ltd. (BBG), the Australian surfwear company that’s breached debt payment terms, suspended its shares to pursue takeover talks after an exclusivity period with one potential bidder lapsed.
Billabong needed trading to be on hold to “progress discussions with interested parties”, the Gold Coast, Australia-based company said in a regulatory statement. Exclusivity over a provisional A$287 million ($292 million) bid from Sycamore Partners Management ended yesterday and Billabong had also been in talks with Altamont Capital Partners.
Shareholders who’ve seen the stock fall as low as 45.5 Australian cents may need to fund a further capital raising in the absence of a bid, according to Credit Suisse Group AG, UBS AG and Commonwealth Bank of Australia. (CBA) Billabong, which has reported declines in sales for four consecutive semi-annual periods, said in February the company will post 80 percent of its assets and 85 percent of its earnings as security to its lenders after writedowns put it in breach of terms on its debt.
“The number of companies undertaking due diligence and in turn passing or putting forward materially lower bids suggests to us other underlying issues could be present.” Ben Gilbert, an analyst at UBS in Sydney, wrote in a note to clients April 9. There’s “significant downside risk to the share price should a bid not proceed,” he said.
The Sycamore group, which also includes Billabong’s Americas director Paul Naude, put in a provisional bid of A$1.10 a share Dec. 19. The group was looking for a price below a 60 cents a share revised offer made April 9, the Australian Financial Review newspaper reported on its website yesterday, without saying where it had got the information.
Christina Stenson, a spokeswoman for Altamont at Brunswick Group LLP, declined to comment on the private equity firm’s plans earlier today. Altamont had studied a bid with a provisional price of A$1.10 and wasn’t admitted into the exclusive talks last month.
Billabong’s market value has declined 67 percent since Feb. 17, 2012, when the company reported that TPG Capital had approached it with a takeover offer. Since that date, Billabong has already turned down three private equity bids and had suitors walk away twice.
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