Surfwear retailer Billabong International has left the door open for takeover offers as it starts shedding 400 jobs, closing stores and offloading a chunk of its accessories business.
Billabong shares surged more than 60 per cent when they came out of a trading halt on Friday as the company announced a major restructure.
Under its revamp plan, Billabong will sell a 48.5 per cent stake in its Nixon Inc accessories brand, close up to 150 stores and axe about four per cent of its global workforce, including 80 jobs in Australia.
The news came after Billabong rejected a $A3 per share takeover offer from US private equity giant TPG capital worth about $A776 million.
Chairman Ted Kunkel said Billabong needed a solution to its debt problems which offered certainty.
“The board could not risk the future of the company and ignore the bird in the hand to explore any last minute, highly conditional, non-binding proposal that had the ability to leave the company exposed given the current pressures on our balance sheet,” he told analysts.
He said the $432.71 million Nixon deal was the best of the available alternatives.
“Having said that, we as a board continue to prepare to engage with anybody who puts forward a proposal which is in the best interest of the company and its shareholders,” Mr Kunkel said.
Billabong hopes the action will stop it breaching its bank covenants as it pays down debt.
Like many in the sector, it has been struggling with difficult trading environments worldwide.
News of the restructure came as the company posted a 71 per cent slump in first-half net profit to $16.097 million for the six months to December 31, 2011.
Billabong said it had been hit by the rise in value of the Australian dollar against the euro and US dollar.
While sales in Australia were up 10 per cent for the half, they were lower in the US and Europe, while net debt rose by nearly 40 per cent.
Despite the gloomy earnings, Billabong shareholders were happy with the restructure plan and pushed the stock up 83 cents, or 46 per cent, to a two-month high of $2.62.
The stock is still trading at less than a third of its February, 2011 price of $8.00.
Billabong revealed about 25 to 30 underperforming Australian stores were slated to close during the next 15 months.
But it said it would try to minimise forced redundancies by redeploying staff from closed stores to other Billabong outlets.
Chief executive officer Derek O’Neill rejected suggestions that Trilantic would only hold Nixon for a short time.
“We’ve all gone into it with a long-term view,” he said.
However, he said shareholders would have to get used to a drop in group sales, with the closure of stores and the partial sale of Nixon.
“Group revenue, moving forward, will be smaller than what we’ve had in other years,” he said.
