Seems like the company has rejected TPG's initial proposal of $3.00. TPG subsequently increased their offer price to $3.30 to facilitate due diligence but was flatly rejected by the directors and major shareholders Gordon Merchant and Colette Paul and I quote from their lawyer's letter to TPG, "
2. do not support Billabong taking any steps to assist or facilitate a proposal by TPG Capital, including allowing TPG capital to commence due dilligence on Billabong, even if the price TPG capital offered was $4.00 per share (which our clients consider would still represent a discount on the true value of Billabong shares)
"
There are rumours as well that KKR and Blackstones are sniffing onto this deal as reported by The Financial Times.
Anyone has thoughts on this deal? I'll write more when I get some time to get more info.
Initial thoughts, on Feb 17 2012, Billabong annouced a major restructuring including closing 150 outlets and dismissing 400 full time workers. Seems like the company isnt holding up well. If you look at the share price, that is the case as well.
If you look at the shareholder structure, besides Mr Merchant that owns 14.8% of the shares(since he is founder), he might not want to sell, but the rest are institutional investors. Need to check on their buy in price to see at what levels they would be sellers.
Again to re-iterate, there isnt any binding deal here.
bbg was $4 in December last year....so the $3 & 3.30 TPG lobbed was very very opportunistic..
ReplyDeleteBBG crashed from $4 to 1.70 in december becuase investors were worried that bbg would have a dilutive capital raising. BBg has addressed this by selling a half share in a non core asset in stead..
Bloomberg estimate that at A$3 a share, the offer could be raised 39 percent and still be the cheapest comparable clothing sector takeover since at least 1998...shows how low a ball TPG bowled...
http://www.bloomberg.com/news/2012-02-26/billabong-rejects-tpg-s-818m-offer.html
Also BBG was $8 this time last year....has global brands in 80 countries.....and is very well leveraged to the world economy....thats why so many PE companies are opportunistically targeting it right now..
ReplyDeleteApart from Blackstone/KKR ....even PEP & Archer capital from Australia are considering launching a combined bid....
There is an article on this in the financial times today...
Also BBG had crashed heavily in december as it was targeted majorly by hedgefund shorters.....it was the second most shorted stock on the ASX in december with 12% of its shares on issues then shorted.....this is especially a very high amount considering only about 30% of its capital actually trades on the market...
ReplyDeleteit is still about 9% short sold right now... Go to ASIC short selling reporting to see its accumulated short register..
Plus google the Volcom transaction....Volcom.. a minor competitor was picked up for $600m mid last year by PPR....Billabong is 4 to 5 times bigger then volcom....but TPG were offering $900m
Hi Anon,
ReplyDeleteThanks for the points you brought up. Generally i agree with you that Private Equity companies tend to put in low ball offers, which is why i am always hesitant to engage in a deal where the counterparty is a PE firm.
Very possible that nothing is going to come out now. Given that they have raised money through selling Nixon and they have their restructuring in place. Unless some private equity comes in with a better valuation (above $4.00) to start the ball rolling, I wouldnt hold my breath on this deal. What are your thoughts on a possible deal coming in from other PEs?