A LITTLE over a year since listing SurfStitch Group (ASX:SRF) on the Australian Securities Exchange, the head of the online actionwear retailer, Justin Cameron, appears to be harbouring plans to take the company back into the veiled world of private-equity ownership.
Cameron (pictured right) has announced his resignation as CEO and managing director of the Gold Coast-based company, ostensibly to work on a proposed takeover offer for SurfStitch.
This comes in the wake of a massive slump in the company's share price last month in the aftermath of a solid profit result, leaving shareholders who paid as much as $2.13 for the shares in the dark over the fate of their investment.
The company raised $50 million as recently as November through a private placement set at $2 a share, with some of those funds used to repay the debt that came with the $23.7 million acquisition last year of online surf shop Surf Hardware International.
SurfStitch shares slumped more than 40 per cent to below their $1 issue price when its profit was revealed on February 25, with the fall largely attributed to management declining to commit to the prospectus guidance for the FY16 full year.
News of a potential takeover gave SurfStitch shares a much needed boost this morning, with the shares rising more than 22 per cent to a high of $1.45.
The SurfStitch board has immediately distanced itself from the possible privatisation process.
"The company stresses that it has not, to date, received any formal or informal proposal from, nor has it had any discussions with, private equity in relation to any potential acquisition of the company," it says in a statement to the ASX.
"Furthermore, the company has not received any specific information from Mr Cameron in relation to what the possible terms and conditions may be of any potential acquisition proposal."
SurfStitch has established an independent board committee to weigh up any proposal it may receive from the as yet unnamed private equity group. Some reports have suggested US-based TSG Consumer Partners has shown an interest.
The independent committee has engaged UBS as financial adviser and Herbert Smith Freehills as legal adviser to the expected takeover proposal.
"Any proposal received by the company would be assessed on its merits and in the context of maximising shareholder value as it would in the ordinary course," says the company.
"However, it is important that shareholders note that there is no certainty that any proposal or approach from any party may be forthcoming."
Chairman Howard McDonald will take on the role of interim CEO during this process.
"The company has no update further to the recent release of its 1H16 interim results and continues to pursue a number of exciting investment opportunities consistent with its global content strategy," SurfStitch says.
SurfStitch posted a net profit of $5.7 million for the half-year ending December 31, up from a pro forma net profit of $300,000 a year earlier.
At the time, directors indicated a slowdown in its acquisition strategy in order to focus on driving content through existing and newly acquired multi-media channels.
While SurfStitch predicted strong double-digit revenue growth to continue, it failed to reaffirm its full-year EBITDA guidance of between $15 million and 18 million.
"Given the pace of change and long-term opportunities presented to the business, management and the board believe it is no longer prudent to focus on a defined EBITDA range," Cameron said when he announced the profit result last month.
"Instead, EBITDA growth will be flexed based on investment around the global content strategy."
SurfStitch floated on the ASX in December 2014 following a $214 million IPO.
The ASX listing came just months after founders Cameron and Lex Pedersen (pictured left) bought back their full share of the company from majority owner Billabong in August that year for $35 million.
The buyout, funded through private equity, also included Billabong's US Swell.com.
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