UPDATE 2-TPG makes fresh $712 mln bid for Australia's Billabong

* TPG makes A$1.45 per share, indicative non-binding offer

* Since TPG's last offer, Billabong has sold new shares and cut guidance

* Two largest shareholders pledge 12.5 pct to TPG

* Billabong shares jump 24 pct on latest bid

By Victoria Thieberger

MELBOURNE, July 24 (Reuters) - Private equity firm TPG Capital has made a fresh takeover bid for Australian surfwear company Billabong International worth A$694 million ($712 million), Billabong said, just five months after its previous offer was knocked back.

The news sent the retailer's shares surging as much as 24 percent as investors hoped for an end to recent woes.

If the deal were to succeed, it would be the second privatisation in Australia this year after the country's largest buyout firm Pacific Equity Partners agreed to a A$720 million takeover of business services firm Spotless in April.

"The deal in its current form looks like it could get over the line. It is more comprehensive and the valuation multiple is fair," said City Index analyst Peter Esho.

TPG has offered A$1.45 per share, the retailer said, which was a 32 percent premium to Monday's close.

Billabong said the offer was indicative, non-binding and conditional and the offer price may be refined after the buyout firm has seen Billabong's books.

WEAKER SALES

The surfwear chain made a rapid global expansion just before the global financial crisis that left it with a heavy debt, and was then hit with weaker sales as consumers cut back.

Sales declined in Europe, Canada and Australia as the brand lost some of its cachet with young shoppers. It is closing 140 underperforming stores out of the group's 670.

Since TPG's first approach, Billabong has sold half of its of watch brand Nixon, issued a profit warning, hired a new chief executive and raised A$225 million in equity to reduce debt.

Billabong's shares, which were trading around $6 a year ago, slipped when it rejected the takeover offer in February and dived to a record low after its heavily discounted share sale in June.

The share issue was poorly received, with just 51 percent of retail entitlements taken up and 79 percent of institutional entitlements. The underwriters, Goldman Sachs and Deutsche Bank, took up the shortfall.

Billabong's two largest shareholders, Colonial First State Investment and Perennial Value Management, have agreed to sell about 12.5 percent of Billabong shares to TPG, the retail chain said.

The TPG offer would also allow Billabong's founder and top shareholder Gordon Merchant to sell all or part of his holding to TPG.

Merchant, who owns more than 15 percent, was open to another takeover offer after rejecting the first approach, media reports said last month.

With the extra shares on issue, the latest offer is not directly comparable to TPG's previous approach, which was worth A$841 million or A$3.30 per share.

Billabong shares rose as high as A$1.36 on Tuesday and last traded up 19.1 percent at A$1.31.

Goldman Sachs is advising Billabong on its defence.