Doubt takes the heat off Billabong sale

Shares closed 1.5? lower at $1.06 as the market wrestled with the stock's valuation in light of Billabong's statement late on Thursday that TPG had not withdrawn from the sales process but "as part of its due diligence investigations, TPG and its advisers have expressed concerns in relation to some issues".

Shares had already been put into a trading halt following an 18 per cent dive on reports that TPG was considering a withdrawal of its $700 million bid.

"Given the historical issues with this business, there was always the potential for the due diligence process to present problems," said Deutsche Bank analyst Michael Simotas.

"The probability of a deal progressing at this stage is very difficult to assess but TPG has been pursuing the business since February and made agreements with major shareholders, which suggests that it is a keen buyer."

TPG has a 12.6 per cent interest in Billabong after doing deals with its two major shareholders, Colonial First State and Perennial Value, but is not obliged to buy these stocks if it walks away.

Billabong has backed the turnaround strategy being implemented by new chief executive Launa Inman and has said previously that TPG's offer undervalues the business.

The withdrawal of buyer interest is not expected to be good for the share price.

Mr Simotas said: "The potential for the bid to be lowered or withdrawn altogether is real. There would be considerable downside if this occurs in our view, given our fundamental valuation is [about] 85?."

Last month, rival private equity group Bain Capital stepped into the fray, matching TPG's offer, but it dropped out of the bidding after just two weeks of due diligence.