MERCHANT'S $98M SPLURGE OF THE DECADE NOW WORTH JUST $70M

Written on the 7 May 2015 by Nick Nichols

MERCHANT'S $98M SPLURGE OF THE DECADE NOW WORTH JUST $70M

A DECADE ago, Billabong founder Gordon Merchant (pictured) sold almost a third of his stake in the surfwear giant for a cool $200 million, but ever since then he has been an avid buyer of the stock.

This week, Merchant's interest in Billabong topped 100 million shares after the reclusive company director splashed out a little over $1 million for another 1.7 million shares.

It was the second buy-up in a week for Merchant who snared 1.7 million shares on April 27.

The latest acquisition brings his total stake in Billabong to 100.57 million shares worth about $70 million at the latest trading price.

However, since cashing in his stock in March 2006 for $199.5 million, Merchant has spent the better part of $98 million reacquiring Billabong shares.

On the raw figures, Merchant is a net loser in his decade-long buying obsession with the company he founded more than 40 years ago.

While it is a far cry from Merchant's holding of about $900 million at the market peak in 2007, his current holding is considerably higher than the $7.6 million it was worth in 2013 when Billabong shares hit a record low of 10.8c.

His pre-sale equity position is also yet to be restored despite owning more than double the number of shares held in 2006.

Merchant held 21.5 per cent of Billabong before the big selldown that year, which dropped to 15.1 per cent after the sale. The 2013 buyout of the company by hedge funds Centerbridge and Oaktree whittled that down to just under 10 per cent and the latest acquisitions have tipped him just over this level.

Neither merchant nor Billabong could be contacted for comment on the latest share acquisition, which is seen by some market observers as a measured tactic to bolster his position on the share register and take advantage of recovering markets.

It comes as Billabong's majority owners Centerbridge and Oaktree lifted their holding in the company from 37.4 per cent to 38.4 per cent last week.

However, Billabong has been a slow burner despite the turnaround strategy implemented by US-based CEO Neil Fiske showing some signs of success over the past year.

Billabong posted its first profit in three years during the latest December half with a $25.7 million net profit. It was an encouraging sign but the half-year figure does compare with three years of losses worth a combined $1.3 billion.

Billabong's shares have risen close to 60 per cent in the past year, aided by encouraging growth in the US and Europe.

At last year's Billabong AGM, Merchant was upbeat about the prospects of the company, particularly with Fiske at the helm. Merchant was notably absent as a buyer of the stock during former CEO Launa Inman's reign.

When Merchant dumped $200 million worth of Billabong shares nine years ago the reason he gave was to diversify his asset portfolio. Now it appears he has a renewed appetite for the company.

Beyond a sustained recovery, the big issue that remains for Billabong is the timing of a potential exit by Centerbridge and Oaktree from the share register once they have achieved their investment return on the business.


Author: Nick Nichols

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