'Stretched' Billabong sweats on two bidding groups' offers

Billabong investors are waiting to hear whether concrete bids have emerged from the sportswear group's two suitors.

The company faces another share rout if a successful offer does not emerge from recent due diligence, with one analyst saying the company may need a capital raising to fix its "stretched" balance sheet.

Billabong would not comment on Monday about offers from the two bidding groups, which led to a board meeting over the Easter long weekend.

An announcement is expected before trading begins on Tuesday.

One offer is from Sycamore Partners and Billabong executive Paul Naude; the other is from Altamont Capital and VF Corp, the US retailer behind brands such as Timberland, North Face and Vans.

VF Corp has said its only interest is in the Billabong brand. Altamont is interested in acquiring the rest of the business, which includes the vast retail network.

No one is expecting the two private equity-backed consortiums to maintain the $1.10 indicative price that each offered before conducting due diligence.

Investors may face worse scenarios than a lower bid price.

Credit Suisse recently reassessed the company's valuation on the basis that bids fail to emerge, giving it a weighted valuation of 59¢ a share.

Credit Suisse said there was a downside scenario in which earnings before interest, tax, depreciation and amortisation declined from current guidance of $74 million this year to about $50 million in the 2015 financial year.

It said this was because of a reduction in wholesale earnings resulting from brand rationalisation.

"At $50 million EBITDA, equity value is zero," the broker said.

Last week, UBS raised the prospect that investors may be forced into raising more capital.

UBS retail analyst Ben Gilbert said the most likely outcome was a 91¢-a-share offer - based on the original eight-times earnings before interest and tax multiple before the recent downgrade.

In the absence of a bid, though, Billabong might need a $100 million capital raising to fix the company's "stretched" balance sheet, according to Mr Gilbert.

Billabong has a current market value of just under $350 million.

Billabong shares, which last traded at 73¢, hit a low of 63¢ last month when doubts emerged whether bids would result from due diligence.