One of our favourites Billabong is in trouble. The economic times have hit the surfwear manufacturer and as a company they are having a difficult time.
This week Billabong rebuffed the third takeover bid from US-based private equity firm Trilantic Capital Partners, TPG are a venture capital house made up of ex-Lehman bankers. The buyout company last week offered to buy all of Billabong’s shares for AU$3 each. Billabong said this under-valued their business and their plans.
Billabong earlier this month said it will cut 400 jobs across the world, and will close loss-making stores after reporting a 71 per cent decrease in 6 month earnings, down to AU$16 million ($17.1 million). The company has announced another extensive review of its 677 shops. Between 100 and 150 loss-making stores across Australia, Europe and North America will close and up to 400 full-time jobs will be cut, including 80 in Australia.
This could save Billabong A$30m in rental costs and aid underlying earnings by A$10m next year. They plan a further $30m in costs to be cut across the business (head office and corporate overheads etc), supply chain and marketing budgets. As the same time it announced a reduced dividend of 3c a share – will it impact the business and the clothes we like?
The long-serving Billabong Chief Exec, Derek O’Neill (oh, the irony), and the board, which has remained pretty much unchanged for the past decade, are under a lot of pressure to turn the company around. Perhaps they need some new faces and new ideas as a company.
Billabong are working towards a deal with Nixon, which sells high-end watches and headphones, made about $US125m in sales last year. Nixon are doing OK, and would make an interesting combination – or at least fresh injection of ideas – with Billabong.
Are there Billabong surfwear bargains to be had? We’ll find the cheapest for you, and keep you posted.
We tried to get more financial opinion, but unfortunately Genevieve Morton was unavailable for comment: