Photo: Robert Rough© |
Caught in this pincer movement, the wounded Billabong was clearly bleeding and the share price was in free-fall. The sharks (in suits) started to circle.
The private equity firm TPG Capital, which last week was outed as a formal suitor, was only one of three whose interest was piqued when the share price hit a low of $1.80.
Other private equity groups, Archer Capital and KKR, were also stalking and talking, sources say. It is a fair bet that the veteran rag trader and retailer Solomon Lew was also lured by the smell of a bargain.
However, all but TPG were stopped in their tracks.
Billabong was a standout classic play for private equity - unloved, strategically challenged, under pressure from bank lenders and a conglomerate with lots of separate businesses that could be sold off. Only one thing stood in the way - Billabong's founding father and largest shareholder, Gordon Merchant.
And with a near 16 per cent shareholding and some allies that speak for another 4 per cent to 5 per cent, his views on selling the business were pivotal.
Under normal circumstances, a private equity suitor looking to cut a deal with its prey would target the chairman, who in this case is the seasoned businessman and former Foster's chief executive Ted Kunkel.
But Kunkel's views were redundant unless Merchant was in agreement. The message the sharks received from Merchant was, in effect, get lost.
Merchant had relinquished his formal executive role in the surfwear group years ago, having made hundreds of millions of dollars - albeit a fortune that has..... continue reading
By Elizabeth Knight through watoday.com.au ©
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