Surf’s up again for Billabong

Surf's up again for Billabong

4th time lucky for this struggling company?

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published November 19, 2012 2:42 pm AEDT

Perennial takeover target, Billabong International (ASX: BBG) may be finally taken private.

The head of Billabong's United States business, Paul Naude, is considering a potential leveraged buyout of the company. Billabong has given Mr Naude six weeks to discuss his plans with financiers, and has stepped down from his role while he considers the possible deal.

None of Billabong's board or senior management team have any part in Mr Naude's move, and it wasn't solicited by the company.

Billabong has been in the news regularly this year, following two aborted bids by private equity firm TPG Capital, and another abandoned bid by a company believed to be Bain Capital. TPG originally made a $3 per share bid in February, which was upped to $3.30, but both of which were rejected by Billabong's board. TPG and Bain then made separate bids of $1.45 per share in July and September respectively, but both walked away, after completing due diligence.

With just six weeks to discuss his plans with financiers, Mr Naude is going to be busy, as that's not much time. What his plan is for Billabong is unknown, whether he will split it up, sell off brands or assets, or continue on with the company's previously announced strategy. Billabong is closing under-performing stores, reducing its debt, revising its brands, styles and suppliers and cutting costs.

The news comes just days after investment firm, Mariner Corporation Limited (ASX: MCX) made a bid for youth fashion group, Globe International (ASX: GLB). Globe has seen its share price fall from a high of over $6 in 2004, to around 40 cents currently, and has reported falling revenues for years, and shares were trading at a 37% discount to their net tangible asset value.

While the Billabong story has some way to play out, this may not be final scene. As we've seen with Qantas Airways Limited (ASX: QAN) today, when a company's share price has been hammered down by the market, at some price, someone sees value in the company.

If you only invest in one company this year, make it our "Top Stock for 2012-13". Operating in two hot markets — one set to double by 2012, the other predicted to grow 5x over the next five years — this stock is a solid growth play that also boasts strong recurring revenue, zero debt, and lots of cash. Get its name and full research case in this brand-new FREE report.

More reading

Motley Fool writer/analyst Mike King owns shares in Billabong. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Automatic Renewal

By taking up this offer, you will also be enrolled in our auto-renewal program, which is our way of making your ongoing subscription easier by ensuring uninterrupted service. Don't worry, though – you're not locked in, and can cancel your auto-renewal at any time before each 'anniversary' date without question or penalty.