Recommend
Print

Cash flow

Billabong to cut 150 stores and 400 staff to fend off $765 million private equity offer

By Madeleine Heffernan
Friday, 17 February 2012

Under-pressure surfwear chain Billabong International has emerged from a trading halt to play hardball on a private equity offer, deliver a wide-ranging plan to cut costs and declare that domestic retail spending is unlikely to pick up in the near term.

 

Billabong shares jumped 50% to around $2.65 after the company said it would:

  • close between 100-150 stores worldwide;
  • lay off 400 staff, including up to 80 in Australia;
  • seek to cut rent costs by $20 to $30 million;
  • reduce its interim dividend; and
  • sell a 48.5% stake in its Nixon brand to Trilantic Capital Partners to address its “balance sheet issues, in particular to avoid any potential breach of its bank covenants.”

The company reported a 72% first-half profit fall of $16.1 million and its chief executive Derek O’Neill said on a conference call he did not expect Australian retail spending would pick up any time soon.

 

Billabong told shareholders that it had received a "non-binding, indicative proposal” to acquire the company for $3 cash per share, but that $765 million proposal was “not certain.”  

 

“It was subject to due diligence, subject to finance and conditional on a number of other matters, including Billabong not selling down its ownership interest in any of its brands, and exclusivity. In the absence of certainty, Billabong has proceeded with the partial sale of Nixon in order to stabilise its balance sheets.”

 

Billabong entered a halt yesterday, following a report it had received the $3-per-share offer, which is well below its pre-GFC valuation of $12 per share.

 

The report prompted speculation that Billabong founder Gordon Merchant, who is a 15% shareholder, will seek to retake control of the company.

 

The company sells about two-thirds of its products overseas, and has been hit by the weak European and US economies and its debt load.

 

The decision by Billabong to cut stores and seek rent reduction adds to bad news for landlords, who are under pressure to cut prices as retailers struggle with lower margins after the GFC.

 

The company was dubbed as one of the least impressive retail stocks to report in the 2011 reporting season by broker Linwar, alongside Specialty Fashion, the Reject Shop and Premier Investments.

Did you like this article? 

Sign up to the StartupSmart Newsletter to receive a daily news wrap-up straight to your inbox AND a free eBook!

Invalid Input

Comments (0)

Subscribe to this comment's feed

Write comment

smaller | bigger

busy
Invalid Input
 

Follow us

StartupSmart on Twitter StartupSmart on Facebook StartupSmart on LinkedIn StartupSmart on Google+ StartupSmart on Youtube

Subscribe to StartupSmart RSS feeds

Events


  • 2012 Young Entrepreneurs Mentoring Program
    This mentoring program is ONLY for entrepreneurs aged between 18 and 35 years with a passion and ambition for entrepreneurship who have been working in their...

  • Facebook Masterclass Sydney
    Are you ready to become a Facebook master?   And can you afford not to know how to avoid having Facebook permanently delete your page? Facebook Timeline is ...

  • Facebook masterclass Brisbane
    Are you ready to become a Facebook master?   And can you afford not to know how to avoid having Facebook permanently delete your page? Facebook Timeline is ...

  • Angel Dinner Call for Video Submissions
    If you're an entrepreneur in the high-tech space and your business is looking for funding, you might be interested in pitching at this event, held at Table...

  • Digital Leader
    Digital leaders are made, not born. And you too have it within you to become an effective digital leader. As a leader in the digital age, your reach is...

Sponsored Links

Our Partners

 

Private Media Publications

Crikey

loading...

Crikey Blogs

loading...

Smart Company

loading...

Property Observer

loading...

Leading Company

loading...