The water drained from Billabong as the surfwear retailer’s shares plummeted on the back of a cut-price $287 million takeover proposal.
Billabong’s shares plunged nearly 30 per cent, hitting record lows after emerging from a lengthy trading halt on Wednesday.
The struggling retailer revealed late on Tuesday it had entered a 10-day period of exclusive talks about a 60 cents-per-share offer from a consortium headed by US-based Billabong executive Paul Naude, and including Sycamore Partners Management.
The offer is nearly half the $1.10-per-share offer made by the Sycamore consortium last December and far below the $14 mark that Billabong stock traded around in May 2007.
Shares in Billabong plunged by 29 per cent as they resumed trading and closed 19.5 cents, or 26.7 per cent, lower at 53.5 cents.
The share price fall wiped $93.4 million off the company’s market value, taking it down to $256.2 million.
Traders said investors were disappointed that the Sycamore consortium’s revised offer was so heavily discounted.
They also noted that the $287 million offer was worth less than the value of inventory on Billabong’s books.
CMC Markets chief market strategist Michael McCarthy said the big fall in the Billabong share price reflected what usually happened when there were well-founded doubts around takeover bids.
“If you count this move from $1.10 to 60 cents as a further failed bid, that’s now five failed bids here (for Billabong) in 14 months,” Mr McCarthy said.
“The market is very concerned.”
CBA analyst Jordan Rogers said Billabong’s performance had been in freefall in recent years, and it was too early to see any of the benefits of the strategy put in place by chief executive Launa Inman, who was appointed in May 2012.
“Given the competitive position and price points for core Billabong brands, the company’s antiquated inventory management systems, and the risk for further retail store closures, it is difficult for us to have confidence in any Billabong turnaround,” Mr Rogers said in a research note.
He said that if the 60 cents-per-share proposal failed, Billabong would probably have to raise more capital.
Billabong on Tuesday made clear there was no guarantee that the proposed takeover by the Sycamore consortium would proceed.
It had also been in talks with a rival consortium of VF Corporation – owner of The North Face and Timberland outdoor clothing brands – and US-based investment firm Altamont Capital Partners.
Under the revised Sycamore proposal, Billabong shareholders will have the option of taking scrip in a new entity associated with Sycamore, which will be incorporated for the purposes of making the bid.
The families of founding shareholders Gordon Merchant and Colette Paull, who hold about 16 per cent of the shares in Billabong, have agreed to take the scrip consideration.
In February 2012, when Billabong rejected a takeover bid from private equity giant TPG Capital at $3.30 per share, Mr Merchant and Ms Paull said they would not sell even if TPG offered $4.00 per share.
