Billabong will look to offload assets and cut costs to deal with debt after yet another takeover bid for the troubled retailer collapsed.
Confirmation two private equity groups had walked away from taking control of Billabong, as well as yet another profit downgrade, sent the surfwear company’s share price tumbling to new lows.
Billabong lost nearly half its market capitalisation – about $107.8 million – after backpedalling 49.45 per cent, or 22.5 cents, to 23 cents on Tuesday.
The company had been in a trading halt since early May, when it said it was in discussions with two US-based consortia – one including Sycamore Partners and another including Altamont Capital Partners – about a potential takeover.
On Tuesday, Billabong said talks had ended without a deal and instead current discussions with Sycamore and Altamont were on “alternative refinancing and asset sale transactions”.
The funds from these potential deals would be used to repay existing debt facilities in full.
“The refinancing is intended to provide the company with a comprehensive solution and an appropriate capital structure, allowing it to continue its reform agenda,” Billabong chairman Ian Pollard said.
“It’s our intention to conclude these discussions as soon as practically possible while aggressively reducing costs across all our global operations.”
Wilson HTM investment manager Peter Esho said Tuesday’s statement showed the board appeared to have given up the prospect of a full takeover.
“The market was looking for some form of clarity, something of substance,” Mr Esho said.
“I think this has done the complete opposite.
“There’s just more vagueness and more confusion.”
The company knocked back an $850 million bid by private equity firm TPG Capital in February 2012, and other more recent and lower priced proposals have also come to nothing.
IG market strategist Evan Lucas said some buyers would be attracted to profitable brands such as VZ Sunglasses and Reef.
However, there might not be much demand for other properties such as the European chains, leaving Billabong vulnerable.
“If Billabong’s debt shifts well ahead of asset value, it might not have the chance to reinvent itself,” Mr Lucas said in a research note.
“In this situation, the banks will have no hesitation in ripping Billabong limb from limb as the banks collect on its debt.”
Billabong said it was exploring the possible sale of Canadian retail chain West 49.
Meanwhile, Billabong lowered earnings guidance for 2013 for the third time in about six months.
Earnings before interest, tax, depreciation and amortisation were expected to be in a range between $67 million and $74 million, below the $74 million to $85 million range announced in February.
Billabong’s Australasian stores were trading below expectations, with sales so far in 2013 down 5.4 per cent compared with a year ago.
Conditions in Europe were still weak, while they were “slightly ahead of plan for the half” in the Americas.
Billabong reported a $537 million first half loss.
