Markets: Still in a Billabong box seat

What was going on in the heads of the three besuited Goldman Sachs bankers who stood to one side listening to Billabong incoming chief executive Scott Olivet was not apparent. Billabong’s bankers must surely have received the new proposal by rival private equity firms Centerbridge Partners and Oaktree Capital that seeks to trump yesterday's offer from Altamont Capital Partners before the 1530 AEST Billabong news conference – but they weren’t talking.

Centerbridge and Oaktree say under their financing and recapitalisation plans for the clothing retailer, Billabong will pay $40 million in interest over the next five years compared with the $190 million owed to Altamont, whose proposal has been accepted by the Billabong board.

Centerbridge and Oaktree have spent about $300 million buying Billabong debt. Their takeover proposal would have them controlling 60 per cent of the company’s equity and lending Billabong $100 million in new debt.

Altamont’s financing and investment strategy includes $783 million in loans by it and others that could see its Billabong stake rise to 40.49 per cent after 9.5 years. Shareholders will own 59.51 per cent of Billabong.   

Billabong chairman Ian Pollard favours Altamont. “There is only one proposal that is executable,” he told reporters today at Billabong’s store off Sydney’s Pitt Street Mall.

Dressed in a black t-shirt, grey shirt hung loosely over black jeans and black sneakers, his long grey hair swept back from his forehead, former Nike executive and Oakley chief executive Olivet says he won’t work for anyone except Altamont.

He intends to take up his role as Billabong chief executive in 10-14 days. Behind Olivet the woman who he will replace as chief executive, Launa Inman, smiled woodenly throughout Olivet’s comments to reporters.

Billabong “now has the financial freedom, flexibility and time to do the right thing for the business,” says Olivet following the Altamont Capital Partners financing and investment proposal.

“We’re ready to move forward,” says Olivet. “This was a balance sheet story too long.”

If Olivet starts work at Billabong he says he will travel the world meeting company employees, suppliers and retail partners.

The American says 36 hours ago he flew from the US to the Gold Coast. At Billabong’s Burleigh Heads headquarters he met Billabong employees. “There were warm greetings (for me) on the Gold Coast,” says Olivet recounting his visit.

He calls Billabong an “iconic Australian brand” and an “iconic global brand”.

“There is a formidable executive team at Billabong,” says Olivet. He would not be drawn on how many people will be fired from the company. But he did say he Billabong’s problems “are supply chain related costs and system and product costs”.

 Billabong’s “financial performance doesn’t reflect the core loyalty of its consumers”, says Olivet.

Olivet’s says he has worked in action sports since 2001. He says he has an understanding of apparel, footwear, accessories and sportswear and has worked in turnaround situations as well as growth businesses.

There will be Billabong store closures but also store openings, he says.

West 49’s sale process was proceeding, he says. “There are no other specific plans for other brands in the portfolio,” says Olivet.

Olivet says Billabong’s falling revenues are not because of its higher prices for t-shirts and shorts compared to other retailers such as Target. “It’s not a price equation, it’s a brand equation,” he says. “There is incredible brand loyalty” from Billabong customers.

“Let’s move forward. Let’s go on the offense,” says Olivet of Billabong.

Olivet has previously lived in Australia for a year and in 1985 tried to learn to surf at Torquay on a short board. “Don’t learn to surf on a short board,” he says. “Don’t learn to surf in Torquay.”

But he says, “I enjoy getting on a board”.

Billabong’s shares rose 3 cents, or 9 per cent, to 36.5 cents. The stock has surged 43 per cent in two days and has more than doubled in the last month, making it the best performing share on the S&P/ASX200 Index, according to Bloomberg data.