March 22, 2023

DealBook: TPG Drops Billabong Bid

HONG KONG–The private equity group TPG Capital on Friday walked away from its 695 million Australian dollar ($714 million) takeover offer for Billabong International.

Shares in the surfwear company plunged to a record low, falling as much as 19 percent in Sydney trading on Friday, after it announced that TPG’s offer had been withdrawn and acquisition talks had ended.

Billabong did not explain why TPG dropped the offer, but had said in a stock exchange announcement last week that: ‘‘As part of its due diligence investigations, TPG and its advisers have expressed concerns in relation to some issues.’’ The company did not elaborate on what those issues were.

TPG’s abandoned offer of 1.45 Australian dollars a share was submitted in July, and had marked the second time this year that the firm had tried to buy Billabong.

Founded in 1973 by Gordon Merchant, a surfer who started out by making board shorts in the kitchen of his home on the Australian Gold Coast, the Australian company has fallen on difficult times in recent years.

The company employs about 6,000 people and has approximately 11,000 sales outlets worldwide, including its own branded stores and approved surf shop distributors.

It reported a net loss of 275.6 million Australian dollars for the 12 months through June 3, its first annual loss since listing in 2000. Revenue from continuing operations fell 7.3 percent to 1.44 billion Australian dollars.

‘‘The company expects the current challenging retail trading conditions to continue,’’ Billabong said on Friday.

Mr. Merchant remains Billabong’s largest shareholder, and was opposed to TPG’s first takeover offer earlier this year — which the private equity group had raised to 3.30 dollars from an initial 3 dollars per share — saying at the time that even an offer of 4 dollars per share ‘‘would still represent a discount on the true value of Billabong.’’

That earlier offer, made in February, was worth 851.4 million Australian dollars — or 23 percent more than the follow-up bid that TPG has now withdrawn. Based on Friday’s record low closing share price, Billabong’s market value now stands at 400 million Australian dollars.

Goldman Sachs and the law firm Allens Arthur Robinson advised Billabong on the defunct deal.

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