Billabong sizes up takeover offers as decision looms
Billabong held a board meeting at the weekend where it is believed the strength and weaknesses of proposals from both its takeover suitors were discussed.
Despite markets being closed on Monday, there could be an announcement from Billabong to inform the market about the private equity offers and a decision by directors to either support one or reject both.
Billabong confirmed 10 days ago that the private equity suitors were still interested despite a sharp fall in its share price, before a trading halt was called after fears the potential buyers had walked away, leaving Billabong without a credible buyer.
Shares hit a low of 63¢ when the trading halt was called, against an indicative price of $1.10 per share put on the table by the takeover suitors.
Billabong has interest from two buyers: a team led by Billabong executive Paul Naude and Sycamore Partners, and the other by US retailer VF Corp and private equity group Altamont.
Billabong last traded at 73¢ and fears of a private equity walkout were further stoked when Credit Suisse published a base-case discounted cash flow valuation for the company of as low as 49¢.
But Credit Suisse said it would retain a $1.10 target price to reflect the likelihood of a takeover proceeding.
There has also been speculation that the final offer price from either of the private equity groups could be as a low as 80¢ to reflect recent trading performance by Billabong and worsening conditions in some markets.
It comes at a crucial time for Billabong as it faces tough trading conditions across most of its global markets and a recent breach of its banking covenants after writing off most of the value of its flagship Billabong apparel brand.
Frequently Asked Questions about this Article…
Billabong is weighing two private equity bids: one from a team led by Billabong executive Paul Naude working with Sycamore Partners, and another from US retailer VF Corp together with private equity group Altamont.
Directors met at the weekend to discuss the strengths and weaknesses of the two takeover proposals and to prepare for a possible formal offer or decision that could be announced as soon as Monday.
Although markets might be closed on Monday, the company could still issue an announcement to inform the market about the private equity offers and whether directors will support one bid or reject both.
Shares hit a low of 63¢ when a trading halt was called, later traded at 73¢, while the suitors had put an indicative price of $1.10 per share on the table. Credit Suisse also published a base-case valuation as low as 49¢ but kept a $1.10 target, and there has been speculation final offers could be around 80¢.
The two potential buyer groups are: (1) a team led by Billabong executive Paul Naude in partnership with Sycamore Partners, and (2) US retailer VF Corp partnering with private equity group Altamont.
The takeover suitors indicated an indicative price of $1.10 per share. Market trading saw a low of 63¢, Credit Suisse’s base-case discounted cash flow valuation was as low as 49¢ (though it kept a $1.10 target), and there has been speculation final offers could be around 80¢.
Billabong is facing tough trading conditions across most of its global markets and recently breached its banking covenants after writing off most of the value of its flagship Billabong apparel brand—factors that could influence buyer interest and offer pricing.
Investors should look for a formal announcement from Billabong about the private equity offers and the board’s decision, any updates to trading status or halts, the final bid price if one is made, and further news about the company’s trading conditions or covenant status, all of which could affect the share price.
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