BILLABONG PLUNGES AFTER TAKEOVER WIPEOUT

Written on the 12 October 2012

BILLABONG PLUNGES AFTER TAKEOVER WIPEOUT

SHARES in Billabong (ASX: BBG) plunged by about 16 per cent in opening trading after confirmation this morning equity firm TPG International had withdrawn its offer to buy the embattled board sports company.

BBG was priced at $0.84 late this morning, well below the $1.45 per share the Boston-based TPG had proposed prior to be granted access to the Billabong books nearly six weeks ago.

Rumours have swirled for the past week that TPG had “downed tools’’ in the due diligence process amid concerns that Billabong’s earning slide could be turned around. Reports say TPG experts had doubts over BBG earnings forecasts and the strength of some of Billabong’s core brands.

TPG’s withdrawal comes just three weeks after another potential suitor, reportedly Bain Capital, also withdrew from due diligence of BBG.

BBG today announced “discussions have ceased” with TPG international and the company was proceeding under the “transformation strategy’’ outlined by new CEO Launa Inman two months ago.

Inman announced plans to streamline the company’s complex supply chain, cut its unprofitable product range, reinvigorate the brand and then increase its focus on online selling.

“The board is pleased with the progress around implementation of the transformation strategy and structural organisational change being driven by CEO Launa Inman,” says Billabong Chairman Ted Kunkel in a statement today.

“Acting in the best interests of shareholders has meant we have remained focused on implementing the transformation strategy throughout the formal process.”

Billabong owns a number of leading international board sports brands including DaKine, RVCA and Element.

It announced it first loss this year since listing in 2001. Inman aims to increase earnings before interest, tax, depreciation and amortisation (EBITDA) in FY16 by 250%.

BBG expects the “challenging” retail conditions to continue this financial year but still aims to increase EBITDA to $100-$110 million from $84 million in FY12.


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