Struggling surfwear retailer Billabong International is expected to fend off more takeover bids after its share price dived to its lowest level on record.
More than a third of Billabong’s stock value was wiped out on Monday as investors baulked at a $225 million capital raising and a big earnings downgrade announced last week.
Billabong shares went into freefall after coming out of a trading halt.
They fell initially more than 36 per cent before recovering slightly to close at 96 cents, or 34 per cent down, amid large volumes.
That’s well below the company’s offer of $1.02 per share in its capital raising announced last week.
And it’s more than 14 times less than Billabong’s all-time peak of $13.64 reached on June 30, 2007.
Last Thursday the company revised down its expected earnings and launched a $225 million capital raising to help reduce its $325 million debt pile.
This happened just months after the Billabong board knocked back a $3.30-a-share takeover offer from a private equity group earlier in the year.
Morningstar analyst Tim Jones said around 46 cents of the share price slide on Monday was attributable to the profit warning from last week.
He said the record low share price could attract takeover bids from private equity outfits such as TPG Capital, which had looked over the company earlier in the year.
“I think they’d be very tempted to come back and do another bid,” Mr Jones said.
He said the Billabong board, including major shareholder and founder Gordon Merchant, needed to be accountable for its previous rejection of TPG’s bids.
“A number of groups would be interested in purchasing it – private equity or even trade buyers as well as other international brand companies, particularly in the US,” Mr Jones said.
On Monday Billabong said it had completed the institutional component of its accelerated pro-rata renounceable entitlement offer and had raised about $155 million, or 79 per cent of the new shares available.
The retail component of the offer will take place from Friday under the same terms.
Billabong now expects underlying earnings, which exclude one-off costs from the restructure, at between $130 million and $135 million for the year to June 30.
That’s down from its forecast of earnings slightly above $157 million when it announced plans for a major restructure in February.
Some analysts said Billabong would have to close more than the 140 of its 600 stores as uncertainty remained around cash restructuring charges, forward-order cancellations and excess inventory.
“If Billabong management gets the strategy right and executes to design, the recovery potential in this stock would be extraordinary but so are the odds of achieving this outcome so late in the day,” CBA analyst Jordan Rogers said.
“The capital raising gives some time, but the next six months will be crucial for the business.”
Billabong shares closed 49 cents, or 34 per cent, lower at 96 cents.
