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Billabong PE takeover risks further delay

PE firms Oaktree and Centerbridge face more resistance from Australian regulators over the A$135m proposal.

The Australian Shareholders Association (ASA) has expressed further concerns over the recent bid to take over Australian iconic surfwear brand Billabong by private equity firms Oaktree Capital Management and Centerbridge Partners on the grounds that the company’s financials appear to be improving.

In a statement, the regulatory body said, “It would be reckless for ASA to advocate a vote against this proposal in light of the various warnings being issued, but the market certainly senses a turnaround and [chief executive Neil] Fiske’s AGM presentation was comprehensive and upbeat.”

On Friday last week, Billabong’s shares had recovered to a price of A$0.65 (€0.41; $0.56), prompting the ASA to revert on its prior position of supporting the private equity-backed acquisition.

During the second half of 2013, Oaktree and Centerbridge agreed to buy 329 million ordinary shares in Billabong at A$0.41 per share in a deal worth A$135 million.

While the ASA reportedly said it would back the deal in early January, in its latest statement it said, “It doesn’t seem logical for minority shareholders to vote in favour of [the] proposal.”

“With sentiment towards Billabong improving as new CEO Neil Fiske stabilises the situation, this proposal superficially represents a transfer of value of $79 million from the existing shareholders to the new shareholders, based on a market price of A$0.65. Control is seemingly passing at a substantial discount to the market price.”

The ASA has emphasised it wants the shareholders’ meeting this Thursday deferred until the group releases its December financial results and provides more details on its strategic plan.

“We haven't said we are voting against Billabong change of control. ASA wants more information,” Stephen Mayne, ASA policy and engagement coordinator, tweeted on Monday in response to questions over whether the ASA's actions could in fact damage Billabong’s share price. 

However, Billabong shareholders have expressed their desire for the deal to go ahead without delay, despite the ASA's suggestion that they should try and get a higher price – a move that could endanger the deal if the private equity firms were forced to raise their bid. 

“The need to reform Billabong's business is urgent, there has been a very long and very thorough process looking at all the options and now really there is a need for management to put its total focus on turning around the business,” Chris Fogarty, spokesman for Billabong, told Private Equity International. 

“There is no sense from any of our shareholders that they want us to delay. Quite the opposite, they want us to get on with it and move as quickly as possible.”