Billabong International Ltd., Australia’s largest surfwear company, agreed to extend exclusive talks with a group led by a former director and Sycamore Partners Management for a A$287 million ($295 million) takeover for a further 10 days.
The parties will continue talks until May 8 for a 60 cents-a-share offer after Sycamore asked for more time to complete a report on the quality of the company’s earnings, Gold Coast, Australia-based Billabong said in a regulatory statement. There is no guarantee the transaction will proceed.
“It is anticipated that the extension will be adequate for the completion of the report and its consideration,” Billabong said in the statement.
Billabong’s market value has fallen 68 percent over the past 12 months as it recorded its first loss since a 2000 listing and turned down approaches from three other private equity groups. Sycamore’s April 9 provisional offer allows an exit for shareholders who may yet be asked to fund a capital raising, according to Credit Suisse Group AG.
Hurt by a consumer spending slump and competition from major retailers, Billabong has shut stores, fired employees, written down its brands and sold inventory at below cost. The company on Feb. 22 reported a record loss in the six months ended Dec. 31 on A$567 million of charges, as it wrote off most of the value of its main brand.
Billabong was unchanged at 48 Australian cents at the close of Sydney trading, leaving this year’s decline at 42 percent. It is now trading 20 percent below Sycamore’s offer.
Billabong has posted 80 percent of its assets and 85 percent of its earnings as security to its lenders after breaching terms on its debt.
Billabong’s founder Gordon Merchant said last February that he’d turn down a A$1 billion offer for the business if TPG Capital had proposed it.
Valued at A$3.84 billion at its peak in May 2007, Billabong last February rebuffed an offer of about A$842 million from TPG Capital. TPG and another bidder later made lower offers and walked away after viewing Billabong’s accounts.
The string of takeover approaches have been “very disruptive” and taken up all but five weeks of the 10 months that Chief Executive Officer Launa Inman has been in the job, she said April 10.
Former Americas director Paul Naude joined Sycamore in making the offer. South African-born Naude won that country’s championship as a professional surfer in the 1970s, according to the book, Greg Noll: the Art of the Surfboard. Sycamore, co-founded by Stefan Kaluzny, agreed to buy U.S. teen fashion and music store Hot Topic Inc. for $600 million March 8.
Under the proposal, Billabong founder Gordon Merchant and former employee Colette Paull must exchange their combined shareholding of about 16 percent for stock in a vehicle being set up for the takeover.
Merchant started by cutting board shorts on his kitchen table in 1973 and selling them to Gold Coast surf shops, according to the company’s website.