Billabong sizes up takeover offers as decision looms

Billabong directors were forced to cut short their Easter holiday break, meeting at the weekend to discuss two private equity bids pitched at the surfwear and sports apparel business that could bring a formal takeover proposal as early as Monday.

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.