Markets: Billabong tug-o-war

Billabong may be forced to stop its $395 million loan and asset sale arrangement with Altamont Capital Partners by July 22 if Australia’s Takeovers Panel agrees a takeover and financing offer from rival suitors Centerbridge Partners and Oaktree Capital Management has merit, according to a person familiar with the matter.

New York-based Centerbridge and Los Angeles-based Oaktree have asked the Takeovers Panel for an interim order to stop Billabong utilising a $325 million loan from California-based private equity firm Altamont who plan to buy Billabong’s ski and snowboard clothing brand Dakine for $70 million.

The Takeovers Panel’s 48 members – lawyers, bankers, corporate directors and other professionals – regulate corporate control matters in Australia. They are expected to make a decision on the validity of the takeover component of the Centerbridge-Oaktree  approach before Billabong’s deal with Altamont is due to close on Monday. The panel could still decide that the Dakine sale to Altamont and, separately or as a standalone arrangement, Billabong’s bridge loan is valid, cautioned the person who spoke on condition of anonymity.

If it approves or disapproves Centerbridge and Oaktree’s application for an interim order The Takeovers Panel may have to put it reasons in writing to Billabong and the two private equity groups, says the person. The Takeovers Panel usually takes about two weeks to decide whether a takeover is acceptable or whether it should be stopped. If it decides to halt a takeover it will issue an order. If it allows a takeover to proceed it usually comments on its ruling in correspondence with the parties concerned.

Centerbridge and Oaktree want the Takeovers Panel to issue a final order to halt the Altamont financing and investment in Billabong. They argue their financing and takeover proposal of Billabong should be heard and voted on by Billabong shareholders by October 31. Centerbridge and Oaktree say their $464 million financing, which includes a strategy to take a 61 per cent combined stake in Billabong, is superior to Altamont as it saves the company $150 million in lending costs over five years.

Melbourne-based Takeovers Panel has been asked by Centerbridge and Oaktree to rule on Altamont’s right to a termination fee and a convertible note with an annual coupon of as much as 35 per cent. If Billabong cancels its $325 million bridge loan because it lends money from another company or is acquired by another company it has agreed to pay Altamont a $65 million termination fee.  

Billabong did not return calls seeking comment. Its investment bankers Goldman Sachs did not return a call seeking comment. Centerbridge and Oaktree’s Australian public relations firm declined comment.

At 1425 AEST Billabong’s shares rose 2.5 cents, or 6.9 per cent, to 39 cents, after earlier rising as much as 16 per cent to 42.5 cents The stock has surged 70 per cent this week, the best performing share on S&P/ASX200 Index during the period.