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withdrawn after due diligence.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.
Europe:
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 )
