BILLABONG CLEARS TPG'S ACQUISITION WAVE

BILLABONG CLEARS TPG'S ACQUISITION WAVE

IT has been an exhilarating ride for the Gold Coast’s largest company after a spectacular takeover bid, freefalling share value, capital restructures and the closing of stores.

But Billabong’s decision to reject a renewed $3.30 per share take-over offer from US private equity giant TPG Capital has stood the company proud in the face of prevailing adversity.

When founder and major shareholder Gordon Merchant refused to budge on the offer, he sent a clear signal to swooping equity vultures everywhere – the company is worth much more than $841.8 million.

Billabong’s board is of the opinion the latest price does not reflect the company’s value. While Merchant is coy to put a price on the beloved brand he founded in a Burleigh Heads shed, there is of course ‘a price’. Merchant says anything under $4 a pop is a ‘discount’.

This time last year Billabong shares were around the $8 mark and were once boosting highs of $16 per unit. Shares free-fell 35 per cent to $1.75 in a Christmas jitter, but are now trading above $3.

However a 70 per cent decrease in half year profit from $57.2 million to $16.1 million forced the company to take a hard-line capital restructure approach.

Caught in a rough sea of underperforming bricks and mortar, it will partially sell-down ownership in US watchmaking company Nixon – a deal that will see around $264 million used to pay down debt.

The company entered an agreement with Trilantic Capital Partners (TCP) to establish a joint venture to accelerate the growth of the Nixon brand globally. Billabong and Trilantic will each hold around 48.5 per cent of Nixon and management will purchase the remaining 3 per cent stake.

Billabong CEO Derek O’Neill (pictured) says the transaction values Nixon at around US$464 million.

“Nixon has achieved strong growth since Billabong’s acquisition of the brand in 2006. Nixon is now well placed to grow deeper into accounts such as existing Nixon retailers, specialty watch and fashion retailers as well as select consumer electronics stores,” he says.

Billabong also announced it would close up to 150 stores and shed up to 400 fulltime jobs worldwide, including up to 80 in Australia.

Billabong has 677 company-owned stores and more than 11,000 wholesale doors. The company says, where possible, it will redeploy staff to other Billabong retail stores.

The restructure is expected to save up to $30 million in rent expenses with former Target managing director Launa Inman hired as a consultant advising the board and management on retail strategies.

Despite a slowdown in sales growth in Europe and a searing Aussie Dollar hurting its bottom line, Billabong managed global sales revenue of $847.2 million, up 1.5 per cent for the FY11-12 first half.

EBITDA was $74.1 million, down 21.7 per cent.

Help us deliver quality journalism to you.
As a free and independent news site providing daily updates
during a period of unprecedented challenges for businesses everywhere
we call on your support

How communications technology can raise the bar on customer service, employee experience
Partner Content
From capturing feedback early to providing messages with a higher rate of cut-through, ...
Advertisement

Related Stories

Brisbane Broncos player Ryan James and Gold Coast’s BSKT launch new native food range

Brisbane Broncos player Ryan James and Gold Coast’s BSKT launch new native food range

Indigenous entrepreneur and Brisbane Broncos prop Ryan James will d...

Lewis Land steps up plans for $1.5b Harbour Shores amid Gold Coast housing crunch

Lewis Land steps up plans for $1.5b Harbour Shores amid Gold Coast housing crunch

Sovereign Islands developer Lewis Land Group has stepped up the pac...

Steve McCann steps down as Crown Resorts CEO, replaced by Wynn Macau executive

Steve McCann steps down as Crown Resorts CEO, replaced by Wynn Macau executive

Following the $8.9 billion takeover of Crown Resorts by US investme...

The co-founder question: Do you need one, and how do you find someone?

The co-founder question: Do you need one, and how do you find someone?

I’ve played beach volleyball for Australia for the last decad...