Billabong suitor to split brand from retail
VF Corp, the US retailer behind well-known brands such as Timberland, North Face and Vans, said on Tuesday that its only interest was in the Billabong brand itself. Its private equity partner, Altamont Capital, is interested in the rest of the business, which includes the vast retail network that has proved to be the company's undoing.
"This interest is consistent with VF's stated intent to pursue acquisitions, particularly in the action sports category, to continue to build shareholder value," the company said.
"Altamont's interest lies in acquiring Billabong's other brands and related assets, and is predicated on the firm's mandate to invest in situations where it can provide strategic and operational support to build business success stories."
Altamont has reportedly signed former Oakley chief executive David Scott Olivet to run its share of the Billabong business. VF said the $1.10 per share indicative proposal did not constitute a binding offer for Billabong, nor did it impose any obligation on VF, or Altamont, to make an offer.
The partners are now one of two competing parties conducting due diligence on Billabong with conditional proposals that both value the company at $527 million.
The other interested party, led by Billabong executive Paul Naude and private equity group Sycamore Partners, began due diligence just before Christmas.
News of the offer sent Billabong shares sharply higher on Tuesday, up 16 per cent to 98¢, but still well below the $1.10 indicative offer price. This signals that while a successful offer is considered more likely, the market is still cautious about either proposal coming to fruition.
JP Morgan's Shaun Cousins said the renewed interest may signal that, after 10 downgrades since the 2008 financial year, Billabong earnings may finally be nearing bottom.
"This could suggest 2012-13 could be nearing the low point in the downward trajectory of the Billabong earnings profile," Mr Cousins said.
At its peak in 2008, Billabong reported earnings before interest, tax, depreciation and amortisation (EBITDA) of $292 million. Its forecast this year is for EBITDA of $85 million to $92 million.
Analysts say the VF/Altamont bid has credibility as a potential owner of the Billabong business.
"We have long thought the Billabong brands would be a sensible fit for VF Corp given its attraction to global brands which are not broken but have potential to improve and its other investments in the action sports space (Vans and Reef)," Michael Simotas of Deutsche Bank said.
"When compared to other transactions ... and considering brand equity alone, Billabong appears to offer a lot to an experienced brand manager with a track record of successfully extracting maximum value from global brands."
Frequently Asked Questions about this Article…
VF Corp and private equity partner Altamont Capital are proposing to split Billabong if their due diligence supports a takeover: VF is interested only in the Billabong brand itself, while Altamont is targeting the rest of the business (including the retail network and other assets). Their indicative proposal values Billabong at about $527 million and included a $1.10 per share figure, but the proposal was described as non‑binding and subject to due diligence.
The rival interested party is led by Billabong executive Paul Naude together with private equity group Sycamore Partners. Both the VF/Altamont group and the Paul Naude/Sycamore group were conducting due diligence with conditional proposals that valued Billabong at about $527 million.
The $1.10 per share figure in the VF/Altamont announcement was described as an indicative proposal rather than a binding offer, so it does not oblige the bidders to complete a deal. It does imply a valuation of roughly $527 million, which investors use as a benchmark, but any final price would depend on due diligence and whether a binding offer is made.
News of the proposals pushed Billabong shares up sharply — they rose about 16% to 98 cents — but remained below the $1.10 indicative figure. That reaction shows increased takeover probability but also market caution, since the proposals were conditional and non‑binding.
Analysts point out VF Corp’s track record with global action‑sports and lifestyle brands (VF owns or operates names like Vans, Timberland and The North Face), making the Billabong brand a sensible strategic fit. Deutsche Bank noted that an experienced brand manager like VF could potentially extract more value from Billabong’s brand equity.
The article reports that Altamont has signed former Oakley chief executive David Scott Olivet to run the portion of the Billabong business it would acquire, which would include the remaining brands and the retail network targeted by Altamont.
Billabong’s EBITDA peaked at about $292 million in 2008 but its forecast for the current year was much lower, around $85–$92 million. JP Morgan’s Shaun Cousins noted the company has seen multiple downgrades since 2008, and renewed takeover interest could indicate earnings are nearing a bottom — a factor that matters when valuing the company and judging takeover risk and opportunity.
Investors should watch the due diligence outcomes, whether either bidder converts conditional or indicative proposals into binding offers, any changes to the proposed structure (for example a brand/retail split), and subsequent share‑price movement. Official announcements from Billabong, VF Corp, Altamont Capital or the Paul Naude/Sycamore group will be key triggers for material updates.
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