Business news :Billabong Receives Fresh Takeover Bid from Naude, Sycamore

Billabong said a consortium led by Paul Naude, a board director and former head of Billabong’s Americas division, and New York-based private equity firm Sycamore Partners had offered A$1.10 a share to acquire the company. The new bid, coming in lower than previous offers, coincided with the firm's third profit warning this year.

The company's brands include: Billabong, Element, Von Zipper, Honolua Surf Company, Kustom, Palmers Surf, Xcel, Tigerlily, Sector 9, DaKine and RVCA.

The new bid is valued at A$527 million ($554 million). As reported, Billabong in February rejected a A$3.30 bid by TPG Capital TPG.UL in February as too low, and then have subsequent offers of A$1.45 from TPG and Bain Capital withdrawn after due diligence.

Billabong’s board will consider the conditional bid and told investors in today’s statements to take no action in the meantime. The offer is subject to due diligence, regulatory approval and completion of financing from a group led by Bank of America Corp.’s Merrill Lynch unit, the company said.

In a later statement, Billabong said the consortium's bid was "unchanged" apart from the removal of the condition of confidentiality.

Billabong, which has sold off key assets and replaced its chief executive, said annual earnings could be 15 percent lower than previously forecast and slide as much as 48 percent versus year-ago levels.

Naude stood aside from his role as president of Billabong's Americas operations in mid-November for six weeks to look at putting together a buyout proposal.

Billabong, which is being advised by Goldman Sachs, said the consortium involves Naude as a cornerstone equity investor and Bank of America Merrill Lynch as lead debt financier.

New chief executive Launa Inman has outlined a four-year turnaround strategy to simplify the business and close stores but has been unable to arrest a downturn in sales.

Citing weakness in European, Canadian and Brazilian markets, Billabong cut its forecast for full-year underlying earnings to a range of A$85-A$92 million before interest, tax, depreciation and amortization, excluding one-off items of A$29 million.

That was down from an August forecast of A$100 million to A$110 million.

The major drivers by Region of the reduced underlying EBITDA result include:

The Americas:
o    Trading at the West 49 retail business in Canada achieved positive comparable store growth of 3.1% in September but has since deteriorated with high single digit percentage declines in October and November. This trend is expected to continue through the second half. West 49’s experience is similar to that of many major North American apparel retailers with outerwear being a big driver of this recent under performance;
o    With forward order visibility now into Spring and Summer, the Company is seeing good wholesale results for Billabong and RVCA in the United States, although this is being offset by softness in orders for Dakine and Element and generally tough wholesale trading conditions in Canada;
o    Weaker than previously forecast results for South America, in particular Brazil.

o    A significant increase in cancellations of orders for winter season product, especially in southern European territories;
o    Lower than anticipated gross margins given the challenging trading conditions;
o    Weaker than forecast sales in bricks and mortar retail;
o    Lower than forecast indents for summer season product.

Nixon Joint Venture (48.5% share of JV): o    Lower than forecast net profit after tax.

The Directors note the significant gap between the market capitalisation of the Company and its shareholders’ funds. A full review of the carrying values of the Company’s assets (especially intangibles and goodwill) and its onerous contracts will be conducted at the half year taking into account the then latest trading results. This review may result in impairment and other charges being recorded.

Billabong Chairman Ian Pollard said, "Billabong has undergone a lengthy period of extraordinary corporate activity and while only recently appointed Chairman, I understand the concerns of shareholders. Over much of the past three years it has been seeking to manage volatile and at times unprecedented trading conditions in all markets and has been the subject of several approaches, including Mr Naude’s. Under CEO Launa Inman, the management team is undertaking a series of actions which it can control. The Board supports the transformation strategy, which has already delivered some early improvements in operations and in managing costs. However, it will continue to assess the current indicative, non-binding and conditional proposal as well as other matters that may be outside of its control as it seeks to restore the fortunes of the Company".

( SportsOneSource Media )

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