Share dump a wipeout scare for Billabong
It did little for investors' moods though, with the shares dumped more than 13 per cent to 85¢ - well below the conditional $1.10-a-share offer from Mr Naude's consortium - due to uncertainty over the bid, and a profit downgrade announced on Wednesday that could halve the company's reported earnings this year.
Adding to the misery was news from Billabong that asset value write-downs are being considered for the half-year. This could lead to the company reporting yet another loss this year.
It is believed the earnings target for the four-year turnaround plan of new chief executive Launa Inman is also under review for the half-year result in February.
It could have been worse. Billabong came close to losing its third potential bidder in as many months after details of the latest offer were made public on Monday. Along with Wednesday's profit downgrade, this breached conditions of the offer from the consortium that consists of Mr Naude, New York-based Sycamore Partners, and Bank of America Merrill Lynch, which will arrange debt-financing if the proposal is successful.
A letter from Mr Naude to Billabong on Wednesday afternoon confirmed the deal was still on the table despite the breaches.
"The Billabong board will be considering the proposal and its terms and will update the market as soon as possible," the company said in a second release to the ASX that day.
Credit Suisse analyst Grant Saligari said the bid "in hindsight, is quite well timed" but the price indicated "quite a substantial turnaround assumption" for Billabong.
Mr Naude, a 14-year veteran at Billabong who was overlooked in favour of Ms Inman, took leave to pursue a bid for the company last month.
Billabong said it reduced its earnings forecasts for the year because of a weaker-than-expected performance in October and November both in Europe and in the Americas. The latter business was overseen by Mr Naude until last month.
The company now expects full-year underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to be in a range of $85 million to $92 million, down from its previous forecast of $100 million to $110 million.
One-off costs are expected to lead to statutory EBITDA falling to between $53 million and $63 million for the year ending June 30.
This includes company transformation costs, expenses associated with assessing bids for the company, and a loss on its option to buy out the highly successful online retailer, SurfStitch. The company could also incur impairments on the value of its assets.
Billabong said a review of all its assets would be conducted at the end of the month because of the sharp fall in the company's market value. This fell to as low as $354 million last month. It has intangible assets valued at $796 million.
Ms Inman presented a turnaround plan to the market this year, aiming for a return to positive sales growth in four years and EBITDA to reach $210 million. The company would not comment on Wednesday on the target, which is understood to be under review.
The bid from Mr Naude's consortium is the latest in a series of offers launched in the past year. The bids have been punctuated by profit downgrades, a partial sale of a business, shop closures and job losses.
Frequently Asked Questions about this Article…
Billabong's board confirmed it is considering a $527 million takeover proposal led by senior executive Paul Naude. The conditional offer equates to about $1.10 a share and is from a consortium that includes New York-based Sycamore Partners with Bank of America Merrill Lynch lined up to arrange debt financing.
Shares plunged over 13% to about 85¢ mainly because of investor uncertainty about the takeover bid and a profit downgrade announced the same day. The downgrade raised concerns the company's reported earnings could be halved, prompting the sell-off despite the $1.10-a-share conditional offer.
Billabong cut its full-year underlying EBITDA guidance to a range of $85 million–$92 million, down from a previous $100 million–$110 million forecast. Statutory EBITDA is now expected to be $53 million–$63 million after one-off costs related to transformation, assessing bids, the SurfStitch option loss and possible impairments.
Yes. Billabong said it is considering asset value write-downs for the half-year and will review all assets at the end of the month after a sharp fall in market value. The company noted market capitalisation had fallen as low as $354 million while intangible assets are valued at $796 million, so impairments are a possibility.
The consortium behind the $527 million proposal is led by Paul Naude and includes New York-based private equity firm Sycamore Partners. Bank of America Merrill Lynch has been named as the arranger for debt financing if the proposal proceeds.
Launa Inman’s four-year turnaround plan — which aims to return Billabong to positive sales growth and reach $210 million in EBITDA — is understood to be under review. The company said the earnings target and plan will be reassessed as part of the half-year result process.
The profit downgrade and the public release of offer details did breach conditions of the consortium's offer, but Paul Naude wrote to Billabong confirming the deal remained on the table. Billabong said the board will consider the proposal and update the market as soon as possible.
Investors should watch Billabong’s ASX updates closely for the board’s decision on the takeover proposal, the half‑year results due in February, the outcome of the end‑of‑month asset review, and any further profit guidance or impairment announcements. These releases will be the clearest signals about the company’s near‑term financial outlook and takeover progress.
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