Billabong Takeover Talk Reignites

Billabong International Ltd. is once again the focus of takeover speculation, attracting possibly the attention of Nike and TPG Capital.

Officials at TPG in the U.S. and Australia declined comment, and their counterpart in Australia could not be reached for comment by press time. Nike Inc. officials also did not return a request for comment.

There’s speculation that other private equity firms might start to eye the surf brand, as well as some strategic players such as PPR. The PPR speculation stems from its purchase last year of skate and snowboarding retail chain Volcom for $607.5 million, which competes in the same market as Billabong. In addition, PPR also owns 71 percent of the German sports brand Puma.

Troubles began surfacing for Billabong last week when it issued a profit warning for the year ending June 30. The company said it expects earnings to come in at 130 million to 135 million Australian dollars, or $130.5 million to $135.5 million. That compares with an earlier forecast of 157 million Australian dollars, or $158 million. All conversions to U.S. dollars are at current exchange.

Billabong last week also sold 221 million new shares and raised 225 million Australian dollars, or $225.81 million, but at a discounted price as some institutional investors began questioning the firm’s focus. By the time trading resumed on Monday, the Gold Coast, Queensland-based surfwear firm’s share price dropped as much as 50 percent to a record low of 92.5 Australian cents or 93 cents. The drop wiped out more than 200 million Australian dollars, or about $200 million, of the company’s capitalization and ignited talk that the company could become a takeover target.

The share price on Tuesday recovered by more than 5

percent after founder and non-executive director Gordon Merchant, who owns 15.6 percent of the company, told one Australian newspaper that he would consider buyout offers.

On Wednesday, shares closed nearly flat at 1.03 Australian dollars, or $1.03.

In February, Billabong rejected three takeover offers from private equity group TPG Capital, the last for 3.30 Australian dollars, or $3.53 at the exchange rates at that time, per share. The would value the company at around 817 million Australian dollars, or $765 million at February exchange rates. At the time, Merchant was said to have wanted at least 4 Australian dollars.

With a possible change of heart by Merchant, there’s renewed rumblings that TPG might return to the table with a sweetened offer.

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