Billabong offer by TPG

So TPG has came back again with the same offer for Billabong at $3 per share but this time it does not preclude the Nixon agreement Billabong has with Trilantic Capital Partners. Last week, Billabong announced that they are selling 48.5% of its stake in Nixon to the private equity group. Billabong will have a stake of 48.5% while the management will hold the remaining 3%

However investors should bear in mind that this is a non-binding, indicative proposal that is highly conditional. Another point to bear in mind is that the Acquirer is a Private Equity Group. Deals involving private equities are usually associated with higher risk. The deals when announced tend to be non-binding, indicative proposals that are highly conditional. So unless when a deal is announce and the private equity group has already have in place some skin in the game, I would usually be more cautious.

Now the deal is subjected to due dilligence risk, financing risk and other conditions yet to be announced but precludes the Nixon agreement with Trilantic.

I would say that this shows that TPG is abit more serious in trying to get Billabong. For them to continue making an offer even after Billabong agreed to sell Nikon, one of the stronger brands in the company, shows that they are perhaps a little desperate to get some money into action.

At this point in time, I would recommend no positions in this trade or if you feel the need to diversify, a small position due to the risk inherent in this deal.

At the current closing price of $2.83, there is a 6% premium to be earned if the deal goes through at $3.