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SBD Global/June 22, 2012/Marketing and Sponsorship

Billabong In Financial Troubles, But Will Continue With World Tour Events

Surfwear group Billabong will raise $225M in a "last-ditch attempt to stabilise the business and restore growth," after announcing Thursday another profit downgrade and the departure of Chair Ted Kunkel before next February, according to Richard Gluyas of THE AUSTRALIAN. New CEO Launa Inman revealed the "deeply discounted, six-for-seven, non-renounceable rights issue" at $1.02 a share. Company founder and 15% shareholder Gordon Merchant will chip in $30M, but take up only 85% of his entitlement. Inman said that a "transformation strategy" would be released on Aug. 24, but the retail side of the business would continue to be rolled back with the closure of 140 stores by the end of the '13 financial year. In the analyst call, Credit Suisse analyst Grant Saligari held Billabong accountable for "asking shareholders for $250M with no clear strategy." Evans & Partners analyst Tony Wilson said it was a "massive" job to turn the company around, and it might not be achievable because the Billabong brand was "old and tired" (THE AUSTRALIAN, 6/22). The AAP cited City Index analyst Peter Esho saying that the capital rising was a "huge slap in the face to shareholders, particularly after Billabong rejected a generous offer" from private equity firm TPG Capital four months ago. Esho: "Knocking back private equity’s $3.30-a-share takeover offer and then raising equity at $1.02 will no doubt see a lot of criticism from shareholders and rightly so." JP Morgan analyst Shaun Cousins said that Inman was asking investors "to take a leap of faith" (AAP, 6/21). In Melbourne, Gavin Lower noted board member Allan McDonald "planned to retire in October" (WALL STREET JOURNAL, 6/20).

SHOW WILL GO ON: In Sydney, Fred Pawle cited a Billabong spokesperson who said that the company's "financial difficulties will not affect the company's ability" to put on the next event on the surfing World Tour. The Billabong Pro Tahiti is scheduled to begin Aug. 16 and boasts the "famously dangerous wave of Teahupoo, in a remote part of Tahiti." The event is one of the "more expensive events on the World Tour," where licensees often cite costs of $3M to stage an event. Billabong spokesperson John Mossop said, "I don't see any reason why it wouldn't go ahead. It's business as usual" (THE AUSTRALIAN, 6/21).
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