Vulture fund adds twist to Billabong saga
But as more bidders for the crippled Billabong come crashing through the front door, key managers of the retailer are leaving by the back, with two executives from the company's Von Zipper fashion sunglasses brand resigning last week, adding to the two who jumped ship only a week before.
Von Zipper vice-president Vince De La Pena and Rob Riese, a founder and the director of design and merchandising, reportedly resigned last week, at a time when the brand is one of the better performers for Billabong and when the rest of its surf and streetwear businesses are mired in red ink.
Earlier, Terry Strumpf, Billabong's vice-president of merchandising and design and president of the Xcel brand, walked out, as did senior design director Rob McCarty.
Meanwhile, the takeover activity swirling around Billabong continues, with warring hedge funds and advisers elbowing each other to seize control of the retailer which last week posted a full-year loss of $859.5 million on the back of nearly $1.2 billion in accumulated write-downs.
Coastal Capital International, run by US analysts-turned-investors Vlad Artamonov and Todd Plutsky, who have a history of swooping on vulnerable Australian companies, has emerged as the latest trying to ride the Billabong wave. Appearing on the register with a 5 per cent stake in August, Coastal is now seeking to eject the entire Billabong board other than founder Gordon Merchant and Colette Paul, and then appoint its own representatives.
Messrs Artamonov and Plutsky, who run their hedge fund from Midtown Manhattan just a short stroll from Central Park, are also seeking to amend Billabong's constitution around the approval of future debt and equity refinancing arrangements. This is presumably a last-minute attempt to impede a shareholder vote in October on a recapitalisation offer from private equity players Altamont and Blackstone.
The plan is understood to be designed to stymie the proposal from Altamont. Altamont and its partners have already extended a $325 million loan to Billabong and will seek shareholder approval in October for an equity deal as part of the recapitalisation package.
Coastal is thought to be supporting a rival recapitalisation plan from Centerbridge Partners and Oaktree Capital, who themselves are working behind the scenes to win over Billabong directors to support their deal.
Billabong said Coastal had used its 5 per cent stake to call for a general meeting at which it will seek to dump directors and alter the company's constitution. A notice of meeting would need to go out within 21 days and be held within two months.
Billabong said its directors and advisers were reviewing Coastal's request and the resolutions.
"The board does not anticipate that this action by Coastal Capital International will cause any delay or deferral of the company's process to complete the long-term financing," Billabong said.
Altamont said in a statement that it was focused on completing its deal with Billabong.
"The Altamont consortium transaction means Billabong, after many months of uncertainty, finally has a clear path towards the future and to realising the tremendous potential we see in its portfolio of exceptional brands."
Long-suffering shareholders in Billabong had some joy with the company's shares surging on the Coastal pitch, closing up 6¢, or 14 per cent, at 48.5¢.
Frequently Asked Questions about this Article…
Billabong is the centre of a takeover fight involving activist investors and private equity groups. A New York hedge fund, Coastal Capital International, has used a 5% stake to call a shareholder meeting aiming to remove most directors and change the company’s constitution. That move is biting against an existing recapitalisation plan backed by private equity players Altamont and Blackstone, while rival bidders such as Centerbridge Partners and Oaktree Capital are also involved behind the scenes.
Coastal Capital International is a US activist investor run by Vlad Artamonov and Todd Plutsky. With a reported 5% stake in Billabong, Coastal has formally requested a general meeting to try to replace the board (except founder Gordon Merchant and director Colette Paul), appoint its own representatives and amend the company’s constitution to tighten approval rules around future debt and equity refinancing.
Altamont and its partners have already provided a $325 million loan to Billabong and plan to seek shareholder approval in October for an equity deal as part of a broader recapitalisation package. Altamont has said it is focused on completing its transaction to give Billabong a clearer path forward.
Coastal’s requested meeting and proposed constitutional changes appear aimed at disrupting the planned October vote, but Billabong’s board and advisers are reviewing the request. The company has said it does not expect Coastal’s action to delay the process. A notice of meeting would need to be issued within 21 days of the request and the meeting held within two months.
Several senior managers have left amid the takeover activity, including Von Zipper vice-president Vince De La Pena and founder/director of design and merchandising Rob Riese, as well as Terry Strumpf (vice-president of merchandising and design and Xcel president) and senior design director Rob McCarty. Management exits matter because they can signal internal instability and may affect the performance of key brands during a critical recapitalisation period.
Billabong reported a full-year loss of $859.5 million and has nearly $1.2 billion in accumulated write-downs. Those heavy losses and impairments help explain why the company is vulnerable to takeover bids and why investors and private equity groups are actively proposing recapitalisation plans.
Shares jumped on the news: Billabong stock rose 6 cents, or about 14%, closing at 48.5 cents after Coastal’s pitch became public, indicating investors saw potential value or change from the activist move.
Investors should follow whether Billabong issues a notice of a general meeting (which must be sent within 21 days of Coastal’s request), the outcome of any shareholder votes in October on Altamont’s recapitalisation, any board or constitutional changes proposed by Coastal, further resignations or management changes, and any competing offers from groups like Centerbridge and Oaktree. These events will determine the company’s financing path and potential recovery.
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