Billabong to Assess $299 Million Buyout by Sycamore Group

Billabong Spring 2013 Campaign | Source: Billabong

SYDNEY, Australia — Billabong International Ltd., the surf-wear maker whose founder last year said he wouldn’t sell for A$1 billion, agreed to assess a A$287 million ($299 million) offer by a group led by Sycamore Partners Management.

The group, which includes former Billabong director Paul Naude, will hold talks for 10 days with management over a bid at 60 Australian cents a share for the Gold Coast-based company, according to a statement today. Sycamore’s bid is 18 percent below the 73 cents that Billabong fetched before trading in its shares was suspended on April 2.

Billabong, hurt by a consumer spending slump and competition from major retailers that introduced their own surfwear brands, last February rebuffed an approach from TPG Capital that valued it at nearly A$842 million. Since that rejection, Billabong has shut stores, fired employees, wrote down the value of its brands and breached the terms on its debt.

“Investors need to take the opportunity to exit the stock,” Nick Berry, an analyst at Nomura Holdings Inc. in Sydney, said by phone. “There’s no guarantees around the ability to service debt around the longer term and the shares will probably reopen tomorrow at a discount to 60 cents.”

Under the proposal, Billabong shareholders could choose to receive stock in an affiliate of Sycamore that’s being set up for the bid. There is no guarantee that the transaction will proceed, the company said in today’s statement.

The Sycamore-led group indicated it may pay as much as A$1.10 a share, when it first approached Billabong last December. In January, Altamont Capital Partners and VF Corp. also said they would consider a bid that high as they sought to conduct due diligence on the company.

Both bidders were examining offers of as little as 50 Australian cents a share, people with knowledge of the matter said April 4.

Rebuffed Approaches

Billabong was founded by Gordon Merchant, who cut board- shorts on his kitchen table in 1973 and sold them to Gold Coast surf shops, according to the company’s website.

Before the latest bids, TPG made two separate approaches to Billabong last year. TPG offered as much as A$3.30-a-share in February. Merchant said at the time that he wouldn’t support an offer as high as A$4 a share from TPG, according to a regulatory statement. That would have valued the company at about A$1.02 billion, according to data compiled by Bloomberg.

TPG returned with a A$1.45-a-share provisional offer in July, which it eventually dropped. Another unnamed bidder that people identified as Bain Capital also considered a A$1.45 bid before walking away in September.

At its peak in May 2007, the company was valued at A$3.84 billion.

The company on Feb. 22 posted a record loss on A$567 million of charges, as it wrote off most of the value of its main brand. It will post 80 percent of its assets and 85 percent of its earnings as security to its lenders after breaching terms on its debt, Billabong said when announcing its half-year results that day.

By: Brett Foley and David Fickling, with assistance from Anjali Cordeiro in Hong Kong; Editors: Anjali Cordeiro, Mohammed Hadi.