* Billabong says takeover suitors walk away
* Issues third profit warning in six months
* Discussing refinancing options with former suitors instead
* Shares plummet further
By Jane Wardell
SYDNEY, June 4 Australian surfwear company
Billabong International Ltd issued its third profit
warning in six months as it revealed on Tuesday that potential
takeover suitors had walked away from a deal.
Shares in the company plummeted as much as 58 percent after
it said it was instead discussing refinancing options with the
two consortiums -- one led by its former U.S. boss Paul Naude
and private equity firm Sycamore Partners, and the other by
private equity firm Altamont Capital Partners and U.S. clothing
group VF Corp.
"This is the worst fear that we had," said IG markets
strategist Evan Lucas. "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
Billabong and its shareholders have endured a horrible year
since rejecting a bid of A$3.50 a share, valuing the company at
A$850 million ($825.39 million), from rival private equity firm
TPG Capital Management in February 2012.
Billabong's shares sank to an all-time low of A$0.19 on
Tuesday morning. The stock has tumbled from a high of A$13.56
six years ago.
Plagued with high debt from an ill-timed expansion and
struggling as its brands fell out of favour, the company has
sold assets, closed stores, replaced its chief executive and
embarked on a new strategy as a series of takeover proposals
came and went.
Both the Sycamore and Altamont consortiums had put forward
initial bids worth $544 million in December and January before
conducting due diligence. Billabong then entered into exclusive
talks with the Sycamore consortium about a reduced $300 million
Billabong said on Tuesday it was now discussing "alternative
refinancing and asset sale transactions" with the two
consortiums and any proceeds would be used to repay its existing
syndicated debt facilities in full.
"It's our intention to conclude these discussions as soon as
practically possible while aggressively reducing costs across
all our global operations," Billabong Chairman Ian Pollard said
in a statement.
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
amortisation (EBITDA) would be A$67 million to A$74 million.
It was the third time since December that Billabong had
downgraded its earnings outlook from an August forecast of A$100
million to A$110 million.
"It certainly does not look like a great place to be and
there'll be a lot of questions in regards to how their reporting
was done considering how bad the company looks," said Lucas.
The company said Australian retail year-to-date sales on a
comparable store basis were down 5.4 percent from the previous
corresponding period, while gross profit dropped 2.3 percent.
Retail in the Americas was slightly ahead of plan for the
half, but the company said it was considering the sale of its
Canadian retail chain West 49.