Billabong Receives Takeover Offer from Director Paul Naude

on Dec 17, 2012

On Monday 17 December news agency Bloomberg reported that Billabong International (ASX:BBG), the Australian-based company engaged in wholesaling and retailing of surf, skate, snow and sports apparel, has received a takeover bid from director Paul Naude backed by Sycamore Partners.

According to people familiar with the matter Mr Naude and the US private equity firm offered 1.10 Australian dollars a share, valuing the company at $555 million (£343 million). The offer includes a 17.65 percent premium above Billabong’s closing price of 0.935 Australian dollars on Friday. The company’s board is considering the offer.
The company’s share price appreciated today after the news of a possible acquisition reached the market – the stock went up to 0.980 Australian dollars before being suspended because of “a possible change of control proposal”. Billabong has become an acquisition target after it sold new stock at a discount to repay debt, closed down stores, fired staff and posted a record loss amid a slump in consumer demand. Global buyout firm TPG withdrew a 694 million Australian dollar proposal in October, its second since the beginning of the year, and a company which people familiar with the matter said to be Bain Capital also walked away from a bid in September. According to Bloomberg Mr Naude temporarily stepped aside as a director and executive at Billabong on 19 November to pursue a leveraged buyout. He owns about 0.2 percent of the company’s stock, which has lost more than 90 percent of its value since peaking above 14 Australian dollars a share in May 2007.

!m[Shares in the Australian Company Jumped on the Prospects of New Ownership](/uploads/story/1037/thumbs/pic1_inline.png)Jordan Rogers, analyst at the Commonwealth Bank of Australia, opined that the $555 million (£343 million) takeover proposal for Billabong looks low when looking at the EV/EBITDA (Enterprise Value/Earnings Before Interest, Taxes, Depreciation and Amortization) multiple. The broker, who holds a neutral rating on the stock with a price target of 0.860 Australian dollars, said that 1.10 Australian dollars a share represents an EV/EBITDA of 6.8 times fiscal 2013 earnings. The figure is well below comparable action sports transactions such as the acquisition of Volcom by luxury retail group PPR on an RV/EBITDA of 14 times or VF’s takeover of Timberland at an EV/EBITDA multiple of 9.3 times.

“If Billabong’s management believes the fiscal 2016 target, they will knock back this proposal,” Mr Rogers said in a note to clients.
**Indian Distribution Deal with Arvind**
Last week Billabong International signed an exclusive distribution agreement with Arvind to expand sales of its products in India. The deal gives Billabong access to Arvind’s national network in a bid by the surfwear maker to revive its profit after last year’s loss. “Arvind has licensing relationships with a number of international partners,” Phil Nicole, Billabong’s general manager for Asia, said in a statement. “We are therefore convinced that we have found in Arvind a great partner for Billabong as we seek to further grow our Asian operations.”
The Indian company has already signed with Tommy Hilfiger to partner in the country and has licensing deals with Mossimo, Gant and Geoffrey Beene.


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