A paltry $287 million offer for Billabong was not enough to set a floor on the embattled stock, which crashed to another record low on Wednesday. Analysts said the board has no option but to surrender to the private equity-backed bid by Billabong executive Paul Naude.
Trading for the first time in three weeks, Billabong shares fell from 73¢ to a low of 51¢ on high turnover before closing at 53.5¢.
The Sycamore/Naude consortium has pencilled in a "non-binding" offer of 60¢ a share as it enters further negotiations with company management over a potential takeover.
Analysts said the latest valuation of the surfwear retailer - which turned down an indicative offer of $3.30 a share in February last year - is probably a fair one. "Failure of a bid to emerge and a return to current management's turnaround efforts seems unthinkable from Billabong's perspective," said Credit Suisse analyst Grant Saligari, who has a 50¢ valuation on the stock.
"In our view, the company is clearly in freefall and, when combined with a high debt position and lease liabilities, this deal represents the lowest risk exit for existing shareholders," said Citi's Siobhan Lee. Ms Lee is among a group of analysts who see further downside if a suitor does not put the listed stock out of its misery.
This could include further earnings downgrades and "emphasis by the board about execution and refinancing risks still ahead" if the takeover bid is aborted. "The company has been backed into a corner and, in our view, the shareholder's best option will be to accept, given the alternative is likely to be even lower," Ms Lee said.
UBS said the company may need to raise another $100 million from the market if the bid fails. The company raised $225 million in the middle of last year at just over $1 a share. UBS said the fact that the 60¢ offer price has been put forward by the board suggests the directors have "a low level of confidence" in the turnaround strategy put forward in August last year.