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SBD Global/December 18, 2012/Finance

Billabong Has $555M Takeover Offer From U.S. Division Boss

Australian surfwear brand Billabong "is set to release details of a A$527M ($555.8M) takeover offer from the boss of its U.S. division after news of the bid began to leak" Monday, according to Blair Speedy of THE AUSTRALIAN. Billabong "requested a trading halt on its stock after a number of reports claimed that Paul Naude, who last month stepped aside from his position as president of the Americas division to work on a buyout proposal, had made an offer of A$1.10 per share." Naude's non-binding offer "was being made in conjunction with N.Y.-based private equity firm Sycamore Partners, while Bank of America-Merrill Lynch would provide debt." News of the deal saw "Billabong shares surge" A$0.08 to hit a peak of A$1.015 Monday -- the retailer's biggest one-day gain since Naude's buyout plan was first flagged on Nov. 19 -- before the stock "was removed from trade" (THE AUSTRALIAN, 12/18).

A LOW OFFER? In N.Y., Gillian Tan reported Commonwealth Bank of Australia analyst Jordan Rogers said that a "takeover proposal for Billabong International from a consortium including ex-director Naude and private equity firm Sycamore Partners looks low." The broker said that "a A$1.10-a-share offer represents an enterprise value to earnings before interest, tax, depreciation and amortisation, or EV/ebitda, multiple of 6.8 times fiscal '13 earnings." That is "well below comparable action sports transactions, which have been executed at multiples of around 12 times" (WALL STREET JOURNAL, 12/17). Also in N.Y., Tan reported the bid by Naude "follows a string of failed takeover offers for the Australian surfwear retailer." Billabong's "sales have fallen, fueling doubts about its brand's resonance with younger consumers." Billabong "has also been hit by weak consumer confidence around the world and a high Australian dollar that has weighed on revenue" (WSJ, 12/16).

SHAREHOLDERS WAIT: In Sydney, Elizabeth Knight noted Billabong shareholders "have been left in no-mans land -- devoid of information that would enable them to make a choice on whether to follow the market rumours that an offer of A$1.10 for their stock is real or not" (SYDNEY MORNING HERALD, 12/17).
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