July 24 (Bloomberg) -- TPG Capital, the buyout firm run by David Bonderman, returned with a reduced A$695 million ($714 million) offer for Billabong International Ltd., five months after the Australian surf-wear maker rejected its bid.
TPG’s conditional cash proposal of A$1.45 a share may be amended if it gains access to the company’s financial data, Gold Coast, Australia-based Billabong said today in a statement. The company’s stock surged 20 percent to A$1.32 in Sydney, the biggest daily gain since Feb. 17.
Billabong has cut its earnings target, sold new shares at a discount and hired a new chief executive officer since rejecting an approach from TPG in February that valued the company at A$851 million. The earlier bid failed after founder and biggest shareholder Gordon Merchant said he wouldn’t consider an offer below A$4 a share.
“Merchant will obviously be the big sticking point,” said Nick Berry, a consumer analyst at Nomura Holdings Inc. in Sydney.
While the latest TPG bid is less than half the A$3.30 a share offered in February, Billabong has since increased its issued capital by 86 percent after it raised A$225 million selling new stock at a discount to repay debt.
Today’s offer is based on 479 million shares on issue and a net debt position as at June 21 of A$100 million, Billabong said in a regulatory filing. Colonial First State Investment Ltd. and Perennial Value Management Ltd. agreed to sell about 12.5 percent of Billabong’s issued capital to TPG, it said.
TPG could lift its bid to about A$1.60 a share, Nomura’s Berry wrote today in a report. “Operational performance is likely to get worse for Billabong before it gets better.”
TPG’s proposal allows Merchant and fellow director Colette Paull to roll all or part of their stakes into the private company, according to the statement.
Owen Blicksilver, an external spokesman for TPG, declined to comment.
Billabong shares, which closed yesterday at A$1.10, had lost 77 percent of their value in the past 12 months amid weak retail spending in the company’s home Australian market and currency moves that have decreased the value of overseas earnings from its operations in the U.S., Latin America and Europe.
“Billabong is a high risk investment and probably not suitable for mainstream investors,” Credit Suisse Group AG analyst Grant Saligari wrote in a note to clients June 22.
Billabong said Feb. 17 it received a A$3 per share cash bid from TPG and ended talks with the private equity firm 11 days later after the A$3.30 offer was rejected.
TPG’s A$3.30 a share offer valued Billabong at A$851 million, based on the 258 million shares the company said was outstanding at the time.
Billabong is being advised by Goldman Sachs Group Inc. and law firm Allens. TPG is being counseled by Macquarie Group Ltd.
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