UPDATE 1-Australia's Billabong says TPG now sole takeover bidder

Wed Sep 19, 2012 9:34pm EDT

* Billabong says unnamed second suitor has withdrawn offer

* Shares drop 8 pct

* Original suitor TPG continues to look at Billabong books

* Withdrawal comes days after Rip Curl is approached

MELBOURNE, Sept 20 (Reuters) - One of two suitors for Australia's Billabong International Ltd has dropped out of a takeover race for the surfwear retailer, leaving private equity firm TPG Capital as the sole bidder with its offer of $700 million.

The withdrawal comes just days after rival Australian surfwear company Rip Curl said it received unsolicited approaches from several international companies wanting to invest in the privately held firm, in a deal that could fetch up to A$480 million ($502 million).

Billabong, which last month reported its first annual loss since listing over a decade ago as sales fell 7.9 percent, revealed on Sept. 6 that a second party had offered around A$1.45 per share, matching TPG's July offer valued around A$694 million.

That second suitor has withdrawn its offer after being allowed to assess Billabong's finances, the retailer said on Thursday.

Billabong never named the second bidder, though Reuters sources said it was Bain Capital LLC.

Shares in Billabong dropped 8.3 percent to A$1.325 on Thursday.

"It sends a signal that those calling for a revised offer probably aren't going to see one," said Peter Esho, analyst at City Index.

"It says A$1.45 (a share) is a reasonable level and it's definitely not a low ball offer. If it was you'd expect one of the two to have formalised (their offer) or moved on the other. If it was a screaming buy one of them would have," he said.

Billabong, which has lost nearly half its market value in six months, snubbed a more generous TPG offer of A$3.30 a share in February. It then dumped its chief executive in May after several profit downgrades, and appointed Launa Inman who previously headed discount chain Target, owned by Wesfarmers .

Since the first approach from TPG, which has built up a 12.5 percent stake after winning over two institutional shareholders, Billabong has sold half of its watch brand Nixon and raised A$225 million in equity to reduce debt. An aggressive expansion met with weak sales of its Billabong products, as well as brands Von Zipper and Element.

Sales have declined in Europe, Canada and Australia, and the brand has lost much of its cachet with young shoppers. Its competitors include Quiksilver Inc, Pacific Sunwear of California Inc and Zumiez Inc.

TPG has said it could raise or lower its price after it has seen Billabong's books.

The company last month outlined a four-year plan to simplify its business and revive sales, although it conceded investors would have to wait two years for the biggest benefits to flow through.

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