Billabong proxy war looms

Hedge fund Altamont Capital may find itself without a Billabong board to conclude negotiations if a spill is called.

By Ian Verrender · 26 Aug 2013

By Ian Verrender ·
26 Aug 2013

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The gloves are about to come off in the battle for control of Billabong.

A proxy war is looming between both major protagonists now battling for the hearts and minds of Billabong (BBG) shareholders following a scramble to snap up the debt and a subsequent skirmish before the Takeovers Panel.

As competing US hedge funds Altamont Capital and the combined Centrebridge Oaktree swap barbs over the binding deal Altamont concluded with the Billabong board, a third player in the form of New York based minnow Coastal Capital has complicated the situation.

There are suggestions that Coastal, which has emerged with a 5% stake in Billabong, could become a stalking horse for the spurned Centrebridge Oaktree alliance by requisitioning an extraordinary general meeting to overthrow the Billabong board.

Altamont has indicated it will hold a shareholder meeting to vote on the deal it concluded with the Billabong board by the end of next month but has yet to send out a notice of meeting, potentially leaving it vulnerable to be usurped by a board spill before it can even get its proposal to a vote.

The Australian Shareholders Association over the weekend urged the Billabong board to hold talks with Centrebridge and Oaktree, which claims its offer to the surfwear group is superior to the Altamont offer.

Both rival offers are for $325 million of debt and equity but the Centrebridge Oaktree alliance claims that its share price purchase is far more generous than Altamont’s while the loan component has a much less onerous interest rate (see Billabong poised for a turnaround).

Oaktree snapped up control of the Nine Network by purchasing the hopelessly overgeared group’s debt at an enormous discount.

Coastal Capital unsuccessfully attempted to usurp Texas Pacific Group’s takeover of debt stricken Alinta Energy – the first use of debt to gain control of a company’s assets – but ended up with a significant holding in the rump Redbank Energy, which has proved troublesome.

Redbank owns just one asset, the Redbank power station in the Hunter Valley, after TPG took everything else. Redbank has been financially stretched and recently fought off a board spill of its own from a Singapore based investor.