-- Sycamore, Altamont consortia end Billabong takeover talks
-- Talks to now focus on assets sales, refinancing
-- Billabong shares plunge as much as 58% in Sydney
(Adds shares in second paragraph; West 49 sale process in fourth
paragraph; analyst comment in fifth paragraph; details of current
talks from thirteenth paragraph.)
By Ross Kelly and Gillian Tan
SYDNEY--Australian surfwear brand Billabong International Ltd.
(BBG.AU) was moving urgently to raise new funds, including by
selling assets, after takeover talks with two private equity
bidders collapsed and it slashed its earnings outlook again.
Shares in Billabong plunged over 50% in Sydney Tuesday, as
directors refocused talks with Sycamore Partners Management and
Altamont Capital Partners around a cash injection after each bidder
signaled it wouldn't proceed with a formal takeover offer.
Once a poster-child for Australian retail on the global stage,
Billabong's fortunes have tumbled rapidly as the high Australian
dollar made overseas sales less profitable, debts used to fund its
expansion became burdensome and its core brands appeared to have
lost touch with its youthful counterculture roots. The company's
market value fell as low as 91 million Australian dollars ($89
million) Tuesday, a far cry from its price tag of A$3.8 billion in
2007.
Billabong signaled that one of its first assets to be sold would
be West 49, an action sports retailer in Canada. New York-based
boutique investment bank Financo is advising Billabong on the sale
of the business, which involves parties other than Sycamore and
Altamont, a person familiar with the matter said.
"Billabong's balance sheet is again in a fragile position. We
don't view the private equity firms as reliable debt providers,"
said Jordan Rogers, a Sydney-based analyst at Commonwealth Bank of
Australia.
The collapse of the takeover talks marks a new low point in
what's been a tumultuous few years for the company, founded in 1973
at Burleigh Point, on Queensland state's Gold Coast, by board
shaper Gordon Merchant and his then partner Rena.
With humble beginnings stitching and cutting board shorts for
local surfers, Billabong gained recognition in surfing culture and
widened its reach into new sports such as skateboarding and
snowboarding.
Following a rapid offshore expansion last decade and the
acquisition of more brands including Tigerlilly and Von
Zipper--largely supported by relatively cheap debt--Billabong's
earnings were also hurt by the global economic slowdown.
Billabong last year rejected a A$841.8 million offer from buyout
firm TPG Inc. before angering investors with a string of profit
downgrades. More takeover bids followed at lower valuations, all of
them unsuccessful.
Earlier this year, both the Sycamore and Altamont consortia made
indicative offers of A$527 million to secure the right to
scrutinize Billabong's books. By April, Billabong had entered
exclusive talks with the Sycamore group over a reduced offer of
A$284 million. The talks ended soon after without any sign of a
deal.
Early Tuesday, Billabong shares had fallen as much as 58% to a
record low of 19 Australian cents.
Largely blaming poor trading conditions in Australia, Billabong
said it expects earnings before interest, tax, depreciation and
amortization for the year to June 30 of between A$67 million and
A$74 million. That compares to previous guidance of up to A$81
million.
Timberland brand owner VF Corp. (VFC), which was part of the
Altamont bid group, isn't involved in any talks on refinancing, but
still look to buy individual brands from Billabong, another person
familiar with the matter said.
Paul Naude, the former head of Billabong's U.S. operations,
remains part of the Sycamore consortium's refinancing proposal, the
person said.
All the company's brands are available for sale, one of the
people said, adding new Billabong shares won't be issued if either
of the two refinancing proposals is accepted.
Refinancing talks are expected to conclude by next month.
-- David Rogers in Sydney contributed to this report
Write to Ross Kelly at ross.kelly@wsj.com and Gillian Tan at
gillian.tan@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires