Billabong shares dumped

Company goes into trading halt to investigate share price fall

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 March 21, 2013 2:04 pm AEDT

Surfwear maker Billabong International (ASX: BBG) has gone into a trading halt, after shares in the company fell by 20%, hitting 63 cents at one stage.

The company says it has asked for a trading halt so that the company can investigate the reason for the trading levels, and the halt will remain in place until the earlier of commencement of trading on Monday 25 March, or when the company makes an announcement.

This appears to be an unusual step for a company given the ASX and regulators would normally be responsible for investigating any irregularities in trading, and price moves.

Billabong is currently the subject of two takeover bids for $1.10, with US-based retailer VF Corp and private equity firm Altamont Capital Partners on one side, up against Billabong director Paul Naude and Sycamore Partners. Rumours appear to be doing the rounds that at least one of those bids may have been withdrawn, which may have contributed to Billabong's shares falling.

Additionally, research by a Credit Suisse analyst is doing the rounds suggesting that should both bids be withdrawn, shares in Billabong would be worth around 59 cents.

While final bids are due next week, the Australian Financial Review reports that sources close to both bidders expect two proposals to be submitted next Thursday. Whether those bids will still be for $1.10 remains to be seen, but the slide in Billabong's share price over the past few weeks suggest final bids could be lower.

Billabong is targeting earnings before interest tax, depreciation and amortisation (EBITDA) of more than $210 million in 2016, as the company turns it business around, cuts costs, shuts under-performing stores and revitalises its existing stores. The transformation is being driven by Launa Inman, who was appointed managing director in mid-May of 2012. Ms Inman comes from previous roles at Target – owned byWesfarmers Limited (ASX: WES), and Woolworths Limited (ASX: WOW), and has a strong track record in retailing. According to the Australian Financial Review, Ms Inman lifted earnings at Target by 85% over six years

Should the existing bids fail to go ahead, we may see other bidders come out of the woodwork, or we could see founder and Billabong's largest shareholder Gordon Merchant attempt to take the company private.

Foolish takeaway

The dance around Billabong has a few more steps left in it. Where it will end nobody knows.

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The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, 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. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool writer/analyst Mike King owns shares in Billabong.

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