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Last updated: January 15, 2013 9:13 am
The US company that owns the Vans, Wrangler and North Face brands has emerged as a suitor for Billabong International, raising the prospect of a bid battle for the struggling Australian surf and skate wear retailer.
After the stock market closed on Monday, Billabong said it had received a A$527m (US$557m) takeover proposal from VF Corp and Altamont Capital Partners, a private equity group based in California.
The offer matches a A$1.10-a-share buyout proposal from senior Billabong director Paul Naude just before Christmas and takes the number of takeover proposals for the retailer over the past year to six.
Billabong said it would allow the new bidders to conduct due diligence and would assess the competing offers over the next six weeks.
“Billabong will now run a process to evaluate whether a change of control proposal, at a price and on terms that the board would recommend, can be secured,” the Gold Coast-based company said in a statement.
Mr Naude, the head of Billabong’s Americas business, and his backers, Sycamore Partners Management, were given access to Billabong’s books last month.
Shares in Billabong closed at A$0.84 on Monday. They have remained below the level of Mr Naude’s proposal. According to analysts this reflects concerns that any formal offer from Mr Naude and Sycamore Partners might be lower than A$1.10 a share.
But Billabong shares jumped 16 per cent to A$0.98 on Tuesday as investors bet a formal offer for the company was more likely to emerge.
“Billabong’s shareholders are now in a slightly better position, but the outcome rests on due diligence, which will create uncertainty over the next six weeks,” said Citigroup analyst Craig Woolford.
Billabong has warned on profits several times in the past year. The latest alert came in December when Billabong said underlying earnings for the year to June 2013 would be between A$85m and A$92m, down from an earlier forecast of A$100m to A$110m.
Billabong blamed weak trading in Canada, South America and Europe for the downgrade and said it might have to write down the carrying value of company assets.
Nick Berry, analyst at Nomura, said that while the emergence of a second bidder raised the prospects of a “deal getting done”, it had only been a matter of months since two other private equity suitors – TPG and Bain Capital – decided to walk away from a deal after conducting due diligence.
“On the other hand, Naude is an ‘insider’ and VF Corp is a significant North American apparel manufacturer and brand owner, which lends a weight to both consortiums’ A$1.10-a-share proposals that may not have necessarily been present in past non-binding proposals,” Mr Berry said.
Traders said it was not clear why VF Corp, a $16bn company listed on the New York Stock Exchange, needed to partner with Altamont, which has just $500m of capital under management, to make an offer.
In a statement, VF said its primary interest was in the Billabong brand, while Altamont was looking to acquire Billabong’s other labels, which include Element, Von Zipper, Tigerlily and DaKine.
“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 said.
In an offer to accelerate growth in the action sports market, VF paid US$2bn net of cash for Timberland, the boot maker, in 2011.
Altamont is working with Scott Olivet, the former chief executive of eyewear company Oakley, on its bid for Billabong. People familiar with the situation said Mr Olivet involvement lent credibility to its bid. Before joining Oakley, Mr Olivet was an vice president at Nike where he led the acquisitions of Converse and surfwear brand Hurley
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