Troubled surfwear retailer Billabong could join the list of Aussie companies falling into foreign hands after it received a second takeover bid from US private equity firm TPG.
Billabong received the latest takeover offer from TPG at a substantial discount to the original made less than six months ago.
It received TPG’s $695 million offer, which equates to $1.45 a share after the Australian stock market closed on Monday.
The company has advised shareholders to take no action even though its major institutional investors have put their hands up to accept the bid.
The new bid is an 18 per cent discount to the unsuccessful $850 million, $3.30-a-share bid TPG made in February that was rejected by the company as being undervalued.
Shares in the household-name surfwear retailer surged after news of the new takeover offer and closed up 21.5 cents, or 19.55 per cent, at $1.31 on Tuesday.
The share price had plummeted to 96 cents by late June, amid a worsening outlook for the retail sector.
Billabong founder Gordon Merchant has said he felt bad about rejecting the bid and was prepared to accept less.
Only last month Billabong tapped its shareholders for $225 million to reduce its debt from $325 million to $100 million.
TPG’s latest offer is based on Billabong having 479 million shares on issue by the end of this week when those included in the retail component of the company’s current entitlement offer are issued.
The retailer said TPG’s new offer was subject to due diligence and conditional on a number of matters.
“The board of Billabong will update the market following consideration of the proposal and its terms,” Billabong said in a statement.
“In the meantime, Billabong shareholders do not need to take any action in response to the approach received.”
Billabong said TPG’s offer allowed for Mr Merchant and director Colette Paull to roll all or part of their respective shareholdings into the TPG proposal.
This would allow Mr Merchant and Ms Paull to partner with TPG and keep an equity interest in the business, if they wished.
The retailer’s major shareholders, Colonial First State Investment and Perennial Value Management, have agreed to sell to TPG about 14.5 per cent of Billabong’s issued capital.
Nomura analyst Nick Berry said he would not be surprised if Billabong presses for a slightly higher offer.
However, considering the outlook for the retailer was still tough, Mr Berry said he expected Billabong would eventually accept a TPG bid.
“It’s a little bit on the cheap side, so you could see an initial push back from the board or other shareholders.
“But it’s within TPG’s capacity to add another 10 per cent on the deal, and when the outlook is taken into account then they’ll take the offer.”
Mr Berry said the offer to Mr Merchant and Ms Paull to retain their investment in Billabong showed that TPG was taking a friendly approach to the takeover.
TPG’s offer to Billabong comes as foreign companies express strong interest in buying Australian chocolate business Darrell Lea and poultry farmer Inghams.
