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 chief executive 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.
Frequently Asked Questions about this Article…
Two rival private equity groups are vying for control. Altamont (working with Blackstone) has a recapitalisation/counter-proposal that’s been approved by Billabong directors and is due for a shareholder vote in October. A late rescue proposal from Centerbridge Partners and Oaktree Capital has been lodged to derail Altamont’s bid and offers an alternative debt and equity package the consortium says will save Billabong money.
Centerbridge and Oaktree propose delivering a bridge loan to refinance Billabong’s current $325 million loan (originally linked to Altamont) at a 12% interest rate maturing on March 31, 2014. They then propose an equity placement and a rights issue to reduce net debt to about $157.5 million. The consortium also outlines new longer-term debt with a 13.5% interest rate payable in cash and kind.
The proposed placement to Centerbridge and Oaktree would be priced at 35¢ per share, and the rights issue for existing shareholders at 30¢ per share. Under that structure the pair would end up with roughly a 39.7% stake in Billabong.
Centerbridge and Oaktree say their plan would save Billabong between $119 million and $143 million and represents an 81% premium to Altamont’s 20¢ per share offer. They also claim Altamont’s proposal would leave Billabong with significantly higher debt — around $276 million — versus their intended post-transaction $157.5 million.
Altamont, which has partnered with US investor Blackstone, had its recapitalisation reworked after an appeal to the Takeovers Panel. The reworked Altamont deal was approved by Billabong’s board and the company is preparing documents for a shareholders’ meeting scheduled before the end of October, where shareholders will vote on the proposal.
Yes. The article states the late bid from Centerbridge and Oaktree could slow down the process around the Altamont proposal or potentially knock Altamont’s deal out completely, depending on how the board and shareholders react.
Centerbridge and Oaktree said they have engaged with candidates to fill the chief executive role in the event Scott Olivet — who was installed by Altamont — is unable to continue in his role. The consortium has indicated it would seek strategic leadership to help address Billabong’s issues.
Investors should monitor formal announcements ahead of the October shareholders’ meeting, any board statements about competing proposals, updates from the Takeovers Panel if relevant, and specifics of any finalized debt refinancing, placement or rights issue — all of which will materially affect Billabong’s capital structure and shareholder dilution.
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