Billabong board pressured on rival deal
Billabong’s board may be giving more consideration to private equity players Oaktree and Centerbridge’s $325 million debt and equity financing deal as fund managers apply pressure to the board saying that Altamont Capital’s counter proposal is too expensive and denies them an option to profit from any recovery in the stock.
Billabong said on August 23 it had met with and was giving due consideration to turnaround funds Oaktree and Centerbridge. But the high emotion surrounding the August 21 Takeovers Panel decision that forced Altamont Capital to change the terms of its $325 million proposal left some inside and outside Billabong dismissive of Oaktree and Centerbridge. They were initially determined to close a deal with Altamont and gave the firm a revised commitment letter.
Now the board is under pressure to more closely study the Oaktree and Centerbridge proposal that will save the company between $120 million and $143 million in interests costs over five years. Hedge fund Coastal Capital International Ltd., which this month acquired a 5 per cent Billabong stake, has called for an extraordinary general meeting to debate the company’s future and a wholesale replacement of the Billabong board except founder Gordon Merchant and Colette Paull.
Coastal Capital are not aligned with Oaktree and Centerbridge, who have cannily offered Billabong shareholders the right to buy more of the company’s stock for 30 cents a share under its financing plan, well in the money.
Billabong’s stock at 1552 AEST was 48.25 cents. It has surged 271 per cent since June 24 around the time word leaked that distressed debt specialist investors Oaktree and Centerbridge were buying Billabong debt in order to try and gain control of the company. Billabong made a $859.5 million loss in the 12 months to June 30.
No date has been set as to when Billabong must make a decision between the Oaktree and Centerbridge proposal and that of Altamont. The company, courtesy of Altamont, has secured financing until the end of the year. Billabong wants to make “a decision as soon as it is practically possible,” says its spokesman.