Billabong's $560m wipeout
Analyst consensus is for Billabong, which owns a global portfolio of surf, streetwear and fashion brands, to report a pre-abnormal profit of $10.2 million with investors eager to get more clarity about management's strategic direction of the business in the wake of tough trading conditions.
In February Billabong revealed sales and earnings collapses across its core markets of the Americas, Europe and Australasia had decimated its business, triggering more than half a billion dollars in impairment charges and write-downs. It reported a loss of $536.6 million for the December half.
But any discussion about the resuscitation of the business is expected to be crashed by private equity bidders and their advisers who have been jostling for nearly a year to seize control of Billabong.
The battle has intensified over the past 10 days after a successful bid from Altamont Capital and Blackstone was reworked following an adverse ruling from the Takeovers Panel, only to be trumped a few days later by rival suitors Centerbridge Partners and Oaktree Capital, who claim to have put up a better deal for Billabong and its shareholders.
Billabong has said it will be moving ahead with the $US325million refinancing proposal from Altamont and Blackstone with documents to be prepared for a shareholder vote by October.
However, Centerbridge and Oaktree have fired back, saying their fresh proposal, delivered to Billabong directors last week, is a vastly better offer in terms of the takeover premium extended to shareholders, the level of debt to be left in the group and the interest rate it would charge on its loan component.
Centerbridge and Oaktree are working intensively to push Billabong directors to consider their deal, also claiming they could wrap up the details and finalise a recapitalisation within days.
The duo claim they would allow acting Billabong boss Scott Olivet - installed by Altamont - to remain at the helm if their offer succeeds. However, it is believed Mr Olivet has told Billabong directors he would not work with Centerbridge and Oaktree and would resign.
Meanwhile, shareholders seeking some hope of a resurrection of Billabong's fortunes will be updated on trading conditions for the surf and streetwear market when the fiscal 2013 results are released.
A previous strategic plan delivered by former CEO Launa Inman aimed to simplify the business, leverage its brands, improve the retail performance and effect supply chain efficiencies.
Frequently Asked Questions about this Article…
Billabong is expected to report huge write-downs that will produce a roughly $560 million full‑year loss. The group has seen sales and earnings collapses across its core markets in the Americas, Europe and Australasia, which triggered more than half a billion dollars in impairment charges and write‑downs and led to a $536.6 million loss for the December half.
Analyst consensus cited in the article expects Billabong to report a pre‑abnormal profit of about $10.2 million, though the company’s large impairments and write‑downs are driving the headline full‑year loss.
The bidders mentioned are Altamont Capital and Blackstone (which had a successful bid that was reworked after a Takeovers Panel ruling) and rival suitors Centerbridge Partners and Oaktree Capital. The private equity battle matters because different refinancing or takeover proposals affect the level of debt left in the business, takeover premiums for shareholders, interest costs, and ultimately Billabong’s future ownership and strategy.
Billabong said it will move ahead with a US$325 million refinancing proposal from Altamont Capital and Blackstone. Documents are to be prepared for a shareholder vote by October, according to the article.
Centerbridge and Oaktree claim their fresh proposal offers a better takeover premium for shareholders, would leave less debt in the group and charge a lower interest rate on the loan component. They also say they could finalise a recapitalisation within days and have pushed Billabong directors to consider their offer.
Acting Billabong boss Scott Olivet, who was installed by Altamont, would reportedly be allowed to remain if Centerbridge and Oaktree’s offer succeeds — but the article says Mr Olivet has told directors he would not work with Centerbridge and Oaktree and would resign if their bid prevailed. This highlights management uncertainty during the process.
Shareholders will be updated on trading conditions for the surf and streetwear market when Billabong releases its fiscal 2013 results. That update is expected to give more clarity on the business’s trading performance and prospects.
A prior strategic plan delivered by former CEO Launa Inman aimed to simplify the business, better leverage its brands, improve retail performance and create supply‑chain efficiencies. Investors monitoring Billabong should watch whether any refinancing or new owners commit to or change those strategic priorities.
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