--Sycamore consortium offers 60c cash per Billabong share
--Shareholders also offered shares in Sycamore-affiliated
company
--Billabong founder Gordon Merchant accepts share offer
(Adds background on Billabong, details of offer throughout.)
By Ross Kelly
SYDNEY--A consortium led by Sycamore Partners on Tuesday closed
in on struggling surfwear retailer Billabong International Ltd.
(BBG.AU) with a takeover bid that keeps the Australian company's
founder on board as an investor.
Billabong said it has begun exclusive talks with the private
equity bidder, which has offered 60 cents cash for each of its
shares. Alternatively, Billabong investors can take shares in a new
company affiliated with Sycamore.
The cash offer values Billabong at about 287 million Australian
dollars (US$299 million) excluding debt, confirming a report by The
Wall Street Journal on Monday that cited a person familiar with the
matter.
The modest price tag is a far cry from Billabong's market value
of around A$3.8 billion in 2007. It's also well below indicative
offers of A$1.10 a share made by the Sycamore-led consortium and a
competing group involving VF Corp. (VFC) and Altamont Capital
Partners, which led Billabong's board to open the company's
books.
Billabong was founded in 1973 at Burleigh Point, on Queensland
state's Gold Coast, by Gordon Merchant and his then partner Rena.
Following a rapid offshore expansion last decade--largely supported
by relatively cheap debt--Billabong's earnings were pounded by a
global economic slowdown, a strong Australian dollar that diluted
overseas income, and the dwindling appeal of its core brands among
younger people.
The company last year rejected a A$841.8 million offer from
buyout firm TPG Inc. before infuriating investors with a string of
profit downgrades. More takeover bids followed at lower valuations,
but none has so far succeeded.
Both the Sycamore-led consortium and the group involving VF
Corp. (VFC), the owner of brands including The North Face and
Timberland, cut their bids following a fresh profit warning in
February. The VF-Altamont group has now been frozen out of
talks.
The Sycamore-led consortium, which also includes the former head
of Billabong's Americas division Paul Naude, has been granted an
exclusivity period of 10 business days.
Its offer is conditional on founder Mr. Merchant and his
associate Colette Paull selecting shares rather than cash for their
combined 16% interest in Billabong. Both have indicated they will
accept shares, Billabong said.
The Sycamore group wants to own at least 75.1% of the affiliate
company. If existing investors owning more than 24.9% of Billabong
choose to take shares instead of cash, the share allocation will be
scaled back.
The deal is poised to be the second acquisition by Sycamore
Partners, a New York-based private-equity firm that specializes in
consumer and retail investments, in as many months. The firm agreed
to acquire teen retailer Hot Topic Inc. (HOTT) for around US$600
million in cash last month.
-Gillian Tan contributed to this article.
Write to Ross Kelly at ross.kelly@wsj.com
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