Shares in Billabong have surged 16 per cent amid hopes that a takeover offer from US retailer VF Corporation will ignite a bidding war for the embattled surfwear company.
Billabong on Monday night revealed it had received yet another takeover offer, this time a joint bid from VF Corporation – owner of The North Face and Timberland outdoor clothing brands – and US-based investment firm Altamont Capital Partners.
The offer matches the $1.10-a-share offer the surfwear company received in December from the Sycamore consortium led by US-based Billabong executive Paul Naude.
The news sent Billabong shares soaring on Tuesday, rising 13.5 cents to close at 98 cents, just off their peak for the day of 99.5 cents.
Paterson’s Securities associate director Mark Goulopoulos said the gains suggested investors were hopeful of a bidding war breaking out between the two predators.
He said it also appeared investors were taking the latest two takeover offers more seriously than the string of other failed bids for Billabong in the past year.
“The issue has been that the board have declined any of the approaches that have been made to them,” he said.
“With these recent ones it looks like the company is officially in play so it does look like the market is anticipating some competitive tension coming into the process and have some bidding that is little bit higher than it is already.”
In a statement, VF Corporation said it hoped to use Billabong to expand its action sportswear lines.
VF Corporation said its main interest in the surfwear retailer was the Billabong brand while Altamont was focused on its other brands and related assets, raising the possibility of a breakup of the Australian company.
“This interest is consistent with VF’s stated intent to pursue acquisitions, particularly in the action sports category, to continue to build shareholder value,” VF Corporation said.
IG Markets strategist Evan Lucas said he believed the VF/Altamont bid was a better fit for Billabong than the Sycamore offer because The North Face owner was already a strong player in the actionwear market.
“It looks like a very good fit with VF Corporation, who are the owners of well-known brands such as Reef, so Billabong would fit in nicely into their portfolio,” he said.
Another analyst, who did not want to be named, said VF Corporation’s position in the clothing market would be a benefit for sourcing and create more operational synergies.
However, Option XPress analyst Ben Le Brun disagreed that Billabong would be a better fit with VF, saying Mr Naude’s experience within the company was a plus and therefore both bids had equal weight.
Mr Le Brun said the fact that both consortiums were American may also mean that the US retail market was expected to recover quicker than Australian consumer sentiment.
The latest $526.8 million offer from VF is the sixth takeover bid Billabong has received in nearly 12 months.
Private equity firm TPG made two unsuccessful offers in February 2012 of $776 million and $850 million.
TPG returned with a third offer of $694.5 million, or $1.45-a-share, in July which it withdrew three months later during the due diligence phase.
Bain Capital matched the $694.5 million bid in September but withdrew the offer only weeks later during due diligence.
