July 20 (Bloomberg) -- VF Corp., the world’s largest apparel maker, dropped its pursuit of Billabong International Ltd.’s surf brand and stores because the Australian company wanted more than VF thought it was worth.
VF balked at Billabong’s asking price after evaluating the finances and operations of the company’s namesake brand, Steven Rendle, a VF vice president, said in an interview. VF was interested in Billabong’s surf brand and its stores, including one in Times Square, he said. Billabong this week accepted a refinancing offer to reduce debt amid slumping sales.
“This deal just didn’t work out,” Rendle, president of VF’s outdoor division for the Americas, said by telephone from Greensboro, North Carolina, where VF is based. “Our valuation didn’t line up with what they thought was a fair price.”
VF’s outdoor division, its fastest-growing unit by sales, is the focus of Chief Executive Officer Eric Wiseman’s push for acquisitions, including the $2.3 billion takeover of Timberland in 2011.
VF had initially teamed up with Palo Alto, California-based Altamont Capital Partners to consider bidding for the Billabong brand, which would have joined a roster that includes North Face and Vans. Rendle declined to say how much VF was willing to pay; he estimated the brand generates about $500 million in annual sales.
Under the refinancing deal, a group led by Altamont could end up with a 40 percent stake in Billabong. Altamont also will buy the DaKine brand for A$70 million ($64.4 million), and former Oakley Inc. chairman Scott Olivet will replace Chief Executive Officer Launa Inman.
Billabong was founded by Gordon Merchant in 1973 when he started cutting board shorts in his kitchen and selling them to Gold Coast surf shops, according to the company’s website. Billabong brands include Element, Von Zipper and Tigerlily.
The company’s fortunes turned as major stores introduced their own surf brands and the financial crisis cut consumer spending. The company has closed stores, fired workers and breached terms of its debt.
Billabong and Merchant, still the largest shareholder, rebuffed a takeover approach from TPG Capital worth almost A$842 million last year. TPG and another bidder later made lower offers but walked away after viewing Billabong’s accounts.
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