MARKETS SPECTATOR: Billabong's extended sale

A Paul Naude-Sycamore Partners acquisition of Billabong International at a heavy discount looks inevitable, despite further delays to clinching the deal.

Paul Naude and Sycamore Partners are still in the box seat to acquire fallen surfwear company Billabong International for 60 cents a share. The odd couple now have until May 8 to secure backing from Billabong’s board.

The two parties seem cosy enough, with this morning's ASX announcement stating they "both have been working constructively with the utmost cooperation". Perhaps Sycamore’s promise to let Gordon Merchant and Colette Paull keep 16 per cent of their stock has made the Gold Coast company's founders more amenable to the barbarians at the gate.

Merchant infamously declared he wouldn’t sell Billabong for less than $4 a share, dismissing the $3.30 a share takeover offer from one of the global giants in private equity, David Bonderman’s Texas Pacific Group.

Sycamore apparently needs more time to go over its numbers after conducting due diligence on Billabong and speaking with company executives. The New York-based firm may need to convince itself that Billabong’s business does indeed have a future after it posted a net loss in the six months to December of $536.6 million.

Billabong’s board may now feel convinced that Sycamore and Naude offer the best hope for a business that has lost its cache with consumers and investors.

Billabong shares fell 1 cent, or 2 per cent, to 48 cents yesterday. The stock’s total return over the last 12 months has been -78 per cent, according to Bloomberg data, compared with an overall 15 per cent gain in the S&P/ASX 200 Index over the same period.

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