Tuesday 21 February 2012
Global surfing behemoth Billabong is up for sale for US$825.3 million (about R6.2 billion) plus lots of debt, writes financial expert and analyst Michael Beattie.
Billabong International LTD, is considering a buyout option from U.S. private equity firm TPG Capital in breaking news. Poor sales, debts and a dismal economic outlook have made the company perform poorly on the Australian Stock Exchange. Store closures seem imminent and Nixon is to get sold off in a separate deal.
TGP Capital, a private equity investment firm, is looking to buy Billabong for A$3 a share or A$765 million (US$825.3 million). The price at the time (Friday) represented a 68% increase on its previous days stock price close. The stocks have subsequently moved up to close to this ‘target price’, as all the brokers and market players start trying to make money out of the deal.
TGP Capital are no small fry either. Have a read through their Wikipedia entry and you’ll see they are real players.
‘TPG Capital (formerly Texas Pacific Group) is one of the largest private equity investment firms globally, focused on leveraged buyout, growth capital and leveraged recapitalization investments in distressed companies and turnaround situations.’
Poor sales, the economic downturn, a strong Australian Dollar and even the weather are getting blamed for this drastic course of action. And if you work for Billabong you may need to look for a job, as job cuts and store closures are on the cards. The company expects to close between 100 to 150 of its 677 stores worldwide, which will translate into around 400 jobs.
Billabong will look to sell off its Nixon brand prior to the main sale to TPG Capital to stabilize itself . The company expects to receive $285 million in a side deal with Trilantic Capital Partners, who will get 48.5 percent and Nixons current management, who will get 3 percent.
Just to point out how tough times are out there, most of this money will go into repaying Billabong debt, in order to stay on the right side of the banks. Billabong's current debt stands at a whopping A$851 million.
On the back of this news Billabong's share price has moved up a nice 10% in Monday trade. As you can see from its stock chart, Billabongs price plunged late 2011, after a two year general downward trend. Billabong has seen a 70 percent plus slump in earnings, with net income dropping to A$16.1 million in the six months ended Dec. 31.
http://www.google.com/finance?q=billabong
http://www.bloomberg.com/news/2012-02-16/billabong-gets-823-million-offer-from-tpg-plans-to-cut-jobs-shut-stores.html
http://en.wikipedia.org/wiki/TPG_Capital
http://www.marketwatch.com/story/billabong-to-consider-revised-tpg-buyout-bid-2012-02-20
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