Billabong Receives an Offer to be Taken Private

Well, it appears I’ve done it again.  After having published just this morning an article in which I said, “Billabong would be better off as a private company, but I don’t see a path to privatization that makes sense to Oaktree,” Billabong has received an offer to have its outstanding shares acquired for $1.00 each (Australian dollars) from Boardriders (formerly Quiksilver), in which Oaktree has a majority interest.  Guess I should have added, “to which Billabong could be expected to agree.”  I may still turn out to be right with that caveat.  Here’s the announcement.

INDICATIVE AND NON-BINDING PROPOSAL RECEIVED FROM

BOARDRIDERS, INC.

GOLD COAST, 1 December 2017: Billabong International Limited (Billabong) (ASX: BBG) confirms that it has received a confidential, indicative and non-binding proposal from Boardriders, Inc. (Boardriders) to acquire all of the shares in Billabong, other than those already owned by Boardriders’ related entities, at a price of $1.00 cash per share, via a scheme of arrangement (the Indicative Proposal). Funds managed by Oaktree Capital Management, L.P.(Oaktree) have a majority interest in Boardriders. Oaktree, through controlled entities, already holds 19% of the shares in Billabong and is one of Billabong’s two senior lenders.

The Indicative Proposal is subject to a number of conditions, including due diligence to Boardriders’ satisfaction; securing committed financing; unanimous recommendation from the Billabong Board; and entry into a definitive scheme implementation agreement between the parties. Any scheme implementation agreement would also be subject to a number of further conditions, including shareholder and court approvals, and all required regulatory approvals and clearances. After consideration by the Board and the Company’s advisers of the Indicative Proposal, the Board decided to grant due diligence access to Boardriders to enable Boardriders to put a formal proposal to Billabong. That process is likely to take a number of weeks.

The Billabong Board notes that there is no certainty this process or the Indicative Proposal will result in an offer for Billabong. Billabong shareholders do not need to take any action in response to the Indicative Proposal at this time.

The Company will update shareholders, in accordance with the Company’s continuous disclosure obligations, in due course.

Billabong has appointed Goldman Sachs as its financial advisor and Allens as its legal advisor.

Billabong’s stock closed yesterday in Australia at $0.78 a share.  I imagine it will rise when the markets open in Australia.  I wonder how shareholders will feel about that price.  If this deal is recommended by the Billabong Board of Directors, it would indicate to me that perhaps Billabong isn’t seeing the improvement it expected. As you read above, Oaktree already controls 19% of Billabong’s shares and is one of the two lenders on the debt that matures in under two years.  They’ve got some leverage.

I am also curious what impact this might have on conversations Billabong/Oaktree is having, if any, about buying Rip Curl.  I don’t necessarily want to see it happen, but a deal to combine Quik, Billabong and Rip Curl makes a bit more sense to me if Billabong is private, as the other two already are.