Billabong takeover dumped?

Billabong puts Canadian operations on the chopping block

Mike King

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Published May 24, 2013 1:01 pm AEST

It seems surf, skate and ski wear group Billabong International (ASX: BBG) doesn't expect any takeover offers to proceed, after the company has reportedly put its Canadian retail operation up for sale.

Should a takeover not proceed, many investors could dump their shares, with the company facing a potential equity raising to shore up its balance sheet. Billabong still has over $280m in borrowings, going by its latest financials.

According to The Australian, the West 49 chain, which includes 70 retail stores, 18 Amnesia branded stores, six Billabong stores and two Element stores and some other banners are up for sale. Billabong bought the struggling chain for CAN$100 million in 2010, but the acquisition is believed to have not met expectations.

Billabong CEO Launa Inman said in February, during an earnings conference call, that West 49 had reported negative comps each year since the company purchased it.

"The business cannot stand still," a company spokesman said. "We have previously detailed our plans around transformation and global simplification including retail, and where and when appropriate we will action them."

Billabong shares have been suspended from trading since May 9, and last traded at 45.5 cents. However, in the US, the stock is still trading on the over-the-counter market, and shares have risen from 46 US cents to 65 US cents. Billabong has been in negotiations with a number of parties, but a series of deadlines have passed with no concrete offer emerging.

Foolish takeaway

The longer this drama continues to drag on, the less it appears a takeover will eventuate for the business. After receiving several takeover offers in the past two years at lower and lower prices, Billabong's best bet may be to get on with the job of turning the business around.

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