US Private equity firm Oaktree Capital Management may still face a showdown in it’s attempts to bring Australian surfwear brands Billabong and Quicksilver together with major investors not happy with the Billabong’s board of directors to recommend the Oaktree bid.
As we reported last year Oaktree has offered $1.00 per share for Billabong and currently owns 19 . 2 % of the company. It also owns another iconic Australian founded business – The Surfwear Group – Quicksilver.
Billabong’s Chief Executive Neil Fiske has said that Billabong’s debt load is simply too big to make investments needed to compete with bigger global brands and has accepted that the takeover is the best option for investors. The speed and growth of digital channels are some of the biggest factors re-shaping the retail sector landscape, at present and it is crucial to have the capacity to make the investments needed to compete. Billabong which has $220 million of debt falling due in 18 months, would need to sell assets and raise equity to meet those requirements. The Big players are winning and scale matters. So to continue to drive the company strategy and let the brands compete on a global scale it makes sense to bring the two companies Billabong and Quicksilver together so they can compete Fiske mentioned.
But shareholders have questioned why the Billabong board has changed it’s tune on previous statements last year declaring that it’s turnaround strategies are working.
The Major Director Of Billabong Gordon Merchant who holds 12.8 percent of The Billabong Company has agreed to support the scheme, as has private equity firm Centrebridge Partners which holds 19.2 percent.
The current deal arrangement which is to be completed requires a 75 percent approval from shareholders and Oaktree will not be casting a vote.
Billabong shares rose 2.6 % to 98.5 cents on January 5th 2018. The deal values Billabong current equity at about $200 million a far cry when the company was worth $3.8 billion back in May 2007.
The board is convinced that the current scheme was the right option for investors, the staff and the brands. Comparing share prices over too much time is not the point. The retail environment is changing incredibly fast. This seems to be the right option for the shareholders and the company given the conditions they face right now Billabong Chief Executive Neil Fiske mentioned.
Billabong said that sales over the recent Christmas period were at the lower end of the companies expectations.
Anyway we will wait and see what happens in the next chapter.
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