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SBD Global/June 5, 2013/Finance

Billabong Shares Plunge Following Private Equity Firms' Decision To Abandon Takeover

Surfwear company Billabong "saw half its value wiped out after the company announced an end to long-running takeover talks," according to Josephine Moulds of the London GUARDIAN. The Australian group said two private equity firms, Altamont Capital and Sycamore, had "abandoned plans for a full takeover and were now looking at a deal designed to help pay back its debt." The shares "took a nosedive after they resumed trading on Tuesday," plunging 41% to A$0.26 ($0.25) -- leaving the company worth just A$130M. Sycamore -- which had teamed up with the former head of Billabong's U.S. business -- offered A$0.60 per share, or A$287M, for the company in April. Reports suggest "the firm walked away after its banks asked for more information on the quality of Billabong's earnings" (GUARDIAN, 6/4). BLOOMBERG's Angus Whitley reported after raising capital, selling assets and rejecting at least two takeover bids in less than two years, Billabong on Tuesday cut its earnings forecast again and said that "it may sell Canadian retail chain West 49 to repay debt." Nomura Holdings Inc. analyst Nick Berry: "Raising capital is going to be difficult. The fact that they are flagging asset sales shows the difficulty they are under" (BLOOMBERG, 6/4).

LOOKING TO REFINANCE: REUTERS' Jane Wardell reported IG markets strategist Evan Lucas said, "This is the worst fear that we had. They are now in the situation where they are going to have to be completely refinancing; that will obviously dilute their share price and dilute any form of debt that they've already got, which is the concern they've had the entire time." Billabong said that "weaker trading in Australia and higher-than-expected start-up losses in its Surfstitch Europe business" meant earnings before interest, tax, depreciation and amortization would be A$67M-A$74M. It was the third time since December that Billabong "had downgraded its earnings outlook from an August forecast" of A$100M to A$110M (REUTERS, 6/3). In N.Y., Kelly & Tan wrote Timberland brand owner VF Corp., which was part of the Altamont bid group, "isn't involved in any talks on refinancing, but will still consider buying individual brands from Billabong." All the company's brands "are for sale," and new Billabong shares will not be issued if either of the two refinancing proposals is accepted (WALL STREET JOURNAL, 6/4).
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