Battle for Billabong takes a fresh twist
In the latest and protracted tit-for-tat battle between the rival private equity consortiums - now in its ninth month - Centrebridge and Oaktree have released details of a fresh proposal that they believe trumps that of Altamont and will save Billabong $143 million.
Altamont, which has joined with US investor giant Blackstone, still remains in the box seat. Despite its recapitalisation deal for Billabong being reworked this week after an appeal by its main rivals to the Takeovers Panel, it has been approved by Billabong directors and is set to go before shareholders before the end of October.
But an ambitious grab for control of Billabong launched on Friday afternoon could now slow that process down, or even knock out Altamont's deal completely, with Centerbridge and Oaktree trumpeting a proposal they claim will save the surfwear group between $119 million and $143 million and represents an 81 per cent premium to Altamont's 20¢ per share offer.
They would deliver a bridge loan to refinance Billabong's current $325 million loan with Altamont, at a 12 per cent interest rate to mature on March 31, 2014. An equity placement and rights issue would be used to pay down debt to $157.5 million. The duo claim Altamont's proposal would leave Billabong with much higher debt of $276 million.
New debt under the Centerbridge and Oaktree deal would have an interest rate of 13.5 per cent - payable in cash and kind. A placement to Centerbridge and Oaktree would be struck at 35¢ a share and the rights issue to existing shareholders at 30¢ a share.
This would leave Centerbridge and Oaktree with a 39.7 per cent stake in Billabong.
The Centrebridge and Oaktree consortium believes the company has a well-recognised portfolio of brands with great future potential.
"For the company to overcome the numerous strategic and balance sheet issues it is facing, it needs the right strategy, capital structure and strategic partners with demonstrable track records in investing and building value in the retail and consumer industries," the partners said.
Centerbridge and Oaktree said they have provided details of the new offer to the Billabong board and have engaged with candidates to fill the CEO role at the surfwear group in the event new boss Scott Olivet - installed by Altamont - is unable to continue in his role.
Billabong has backed the Altamont deal and is preparing documents for a shareholders' meeting in October.
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Two private equity groups, Centerbridge Partners and Oaktree Capital, have launched a last-minute rescue proposal aimed at derailing Altamont’s recapitalisation deal for Billabong. Their offer, unveiled after a nine-month contest, claims to save the surfwear group between $119 million and $143 million and could slow or even knock out Altamont’s proposal ahead of an October shareholders’ meeting.
Centerbridge and Oaktree propose refinancing Billabong’s existing $325 million loan with a bridge loan, an equity placement at 35¢ per share and a rights issue at 30¢ per share. They say this will reduce Billabong’s debt to $157.5 million. By contrast, Altamont’s proposal (backed by Blackstone) was a 20¢ per share offer and, according to Centerbridge and Oaktree, would leave Billabong with around $276 million of debt.
Under Centerbridge and Oaktree’s plan, a bridge loan would refinance the current $325 million loan at a 12% interest rate maturing March 31, 2014. New debt in their recapitalisation would carry a 13.5% interest rate payable in cash and kind. An equity placement and a rights issue would be used to pay down debt to about $157.5 million.
If the placement and rights issue occur as proposed, Centerbridge and Oaktree would end up with roughly a 39.7% stake in Billabong.
Billabong’s board has backed Altamont’s reworked recapitalisation deal and is preparing documents for a shareholders’ meeting in October. The new Centerbridge and Oaktree bid could slow the process, prompt further board consideration, or potentially displace Altamont’s offer before shareholders vote.
The main parties are Billabong (the surfwear group), Altamont (a private equity consortium joined by US investor Blackstone) which has a board-backed recapitalisation proposal, and rival private equity suitors Centerbridge Partners and Oaktree Capital, who have put forward an alternative rescue package.
Centerbridge and Oaktree say they have engaged with candidates to fill the CEO role if Scott Olivet — a CEO installed by Altamont — is unable to continue. That indicates a potential change in management depending on which deal proceeds.
Altamont’s recapitalisation deal was reworked this week after an appeal by its rivals to the Takeovers Panel. Despite that reworking, the deal has been approved by Billabong’s directors and is set to go before shareholders before the end of October.
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