Orange County Business Journal

Billabong Halts Trading Amid Report of Bidder’s Cold Feet

Kari Hamanaka, Jerry Sullivan Thursday, October 4, 2012

Trading in shares of Irvine-based Billabong USA's Australian parent has been halted amid recent rumors about its possible sale.

Billabong International Ltd. requested the halt in trading on the Australian Stock Exchange.

The move appears to be related to a recent report in the Australian press that Texas-based private equity firm TPG Capital LP is considering withdrawing an offer to buy the surfwear manufacturer and retailer.

TPG’s $708 million bid equates to $1.48 a share.

Billabong’s shares dropped about 18% to $1.08, for a market value of about $449 million, prior to the halt in trading.

An initial response from Billabong executives said TPG has “expressed concerns in relation to some issues” as part of its due diligence but has not withdrawn from the sale process. They reiterated prior statements that “there is no guarantee that any transaction will eventuate out of the process or that the Board will recommend any proposal, and that continues to be the case.”

Billabong is a core surfwear brand that’s seen some stumbles lately. Its profits plunged 73.6% to $34.8 million on $1.6 billion in sales for the fiscal year ended in June. The disappointing financial results followed a stretch that saw the company sell off watch brand Nixon Inc. to pay down debt, replace its chief executive, and reject two prior offers well above the proposals on the table now.

Billabong’s U.S. unit is one of several OC-based brands in the Billabong stable, including VonZipper, Element, RVCA and Honolua. Billabong employs more than 500 workers here and helps fill the shelves of retailers, including locals Anaheim-based Pacific Sunwear of California Inc. and Tilly’s Inc. of Irvine.

The company also has more than 600 of its own stores internationally.

Billabong retains some key strengths in the action-sports segment of the apparel industry despite its recent stumbles. Its Americas division—which includes the U.S., Canada and South America and is headed by Irvine-based President Paul Naude—accounted for half the company’s annual revenue.

The dust-up over TPG’s bid for Billabong came a week after reports that another company that had matched TPG’s bid withdrew its offer.

The identity of the second bidder was kept confidential, but reports speculated it came from Bain Capital LLC, the Boston-based private equity firm cofounded by Republican presidential nominee Mitt Romney.