BILLABONG HITS NEW ALL TIME LOW

Written on the 18 June 2013

BILLABONG HITS NEW ALL TIME LOW

THE market value of former “billion-dollar baby” Billabong crashed to a paltry $80 million today after another big slide on the share market.

Shares in the Gold Coast surfwear group slumped to a fresh all-time low of 16c - down 2c or more than 11 per cent - amid continued uncertainty over the company’s future and due to end-of-year selling by investors.

The shares have been under pressure over the past two weeks since they emerged from suspension pending news of a possible takeover bid.

The bid never eventuated causing a massive sell-off in Billabong’s shares which halved to around 20c a share after the suspension was lifted.

Instead of a takeover bid, Billabong at the time bemused the market with news that it had been contemplating refinancing proposals with the potential bidders – namely the Paul Naude-led bid backed by Sycamore Partners and the consortium comprising VF Corporation and Altamont Capital Partners.

Any refinancing proposal is seen as crucial to Billabong as its share value is now less than a third of its current debt of about $280 million.

In the wake of the failed takeover bid, Billabong announced a new round of “aggressive” cost cutting which has led to a handful of job losses at its Burleigh head office.

The cost-cutting bid has come amid claims that Billabong has spent about $20 million on consultants to review the business over the past year.

Today’s share price fall also comes on the heels of rumours that Billabong’s relationship with Sycamore Partners has become strained due to the potential suitor’s frustrations with the board over the bid process.

The indicative bid by Sycamore had been pitched at 60c a share, which now stands at a significant premium to Billabong’s current share price and values the company at $280 million.

Although Billabong has previously told Gold Coast Business News that Sycamore has not placed a firm offer for Billabong on the table, Sycamore has yet to formally withdraw from the bid process and it has not commented on its intentions for the company.

Billabong CEO Launa Inman could not be contacted for comment, although some sources have suggested she is overseas on holidays.

Heath Hill, of RBS Morgan’s Chevron Island office, says some of today’s Billabong sell-off could be attributed to investors crystallising tax losses.

“The way out for investors was always going to be a takeover and the minute that fell through we started to see selling,” Hill says.

“That selling gets exacerbated this time of year with investors sitting on gains elsewhere looking to book losses.”

Market observers are now beginning to question the “end game” for Billabong in the wake of the takeover debacle.

One Gold Coast stockbroker, who declines to be named, says part of Billabong’s problem stems from a “lack of clarity” around its recovery plans.

“There is no forward strategy that is discernible,” the broker says.


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