Print and Go Back Surfing [Print without images]

Friday, September 28, 2012
Updated: September 29, 4:55 PM ET
Bain not bidding on Billabong

By Colin Bane

Bain Capital LLC -- the venture capital firm that has been in headlines recently because Republican presidential nominee Mitt Romney is one of its founding partners, seemed like an unlikely bidder for the Billabong International Ltd. when its name emerged as the reported party interested in purchasing the struggling surfing brand.

Billabong's stock has been bouncing around wildly this month, jumping from $1.25 per share to $1.36 after the first news of the Bain offer and as high as $1.47 over the past two weeks. Although Bain Capital has been widely reported as the source of the offer, neither Billabong nor Bain Capital have officially confirmed it. Billabong said on Thursday that the bid in question has been withdrawn, regardless of who made it. Share prices were back down to $1.34 after the news.

"The party referred to in the 6 September announcement has withdrawn from the formal process," wrote Billabong spokeswoman Maria Manning, in a statement released Thursday. "Billabong further advises that the previously announced formal process is continuing. The Board of Billabong reiterates there is no guarantee that, following this formal process, a transaction will be agreed or that the Board will recommend any proposal."

Billabong has been taking heat from the Australian press this week, following Bain's exit.

"There are two sides to the story," wrote The Australian newspaper, "but any disappointment Billabong chair Ted Kunkel must be feeling at losing competitive tension in his company auction would be compounded by the fact that Bain had one look and ran. Private equity professionals are turnaround people, so having heard the presentation, the view at Bain was: there would simply be no turnaround."

A previous offer from TPG International LLC, another American private equity group and also for around $1.45 per share, has been on the table since July 24 and is currently being reviewed in the due diligence stage of the formal process, but Billabong founder Gordon Merchant -- still Billabong's largest shareholder -- has said neither offer reflects the "fundamental value" of the company and its brands, missing the mark by half, an opinion that has been backed by Billabong's Board of Directors.

Still, it's been a tough year for Billabong, which is likely to have some answers one way or another when it holds its annual shareholders meeting, the 2012 Annual General Meeting of Billabong International Limited, next month in Queensland, Australia.

"The 2011-12 financial year was one of major structural change, both within Billabong International Limited and in broader retail and consumer markets globally," wrote Kunkel in his 2012 chairman's report, released on Friday along with an explanatory memorandum to shareholders suggesting that the company is at least taking some active steps to prepare for a takeover or other change in control.

"Growing personal savings rates, subdued consumer spending and a migration of sales from bricks-and-mortar stores to online operations occurred simultaneously in key locations around the world. These trends tested Billabong's business model, which in recent years has been transforming from a multi-brand, wholesale-focused operation to a multi-brand wholesaler and multi-banner retailer," Kunkel wrote.