The board of beleaguered surfwear group Billabong, including founder and former Rich List member Gordon Merchant, has agreed to back a $380 million bid to buy the company from private equity firm Oaktree Capital Management.
US-based Oaktree Capital Management, which owns a 19 per cent stake in Billabong and also controls nearly all the shares in Quiksilver, made its bid in December.
The company said in a statement that it had formally agreed to the scheme of arrangement on Friday. Billabong’s brands include RVCA, Element, Von Zipper, Honolua, Xcel, Kustom and Palmers.
Billabong chairman Ian Pollard said the company was likely to need to raise capital or sell assets to reduce its high debt levels if it did not sell to Oaktree.
“While Billabong has made significant operational progress in recent years, the board is also mindful of the fact that, in the absence of the scheme, Billabong shareholders face ongoing risks and uncertainties associated the the business,” chairman Ian Pollard said.
Mr Merchant, who tolds 12.8 per cent of the company, has agreed to support the scheme, as has private equity firm Centrebridge Partners, which holds 19.2 per cent.
The deal values Billabong’s equity at about $200 million, a far cry from the $3.8 billion the company was valued at back in May 2007. However, the stock fell as low as 63¢ in November.
However, the board’s backing for the deal is likely to infuriate investors including Ryder Capital and Adam Smith Asset Management, who had labelled the Oaktree bid as “opportunistic”.
Billabong chief executive Neil Fiske backed the new owners to protect Billabong’s iconic status as an Australian brand.
“Billabong’s brands’ great strength is their authenticity and heritage. I’m confident those qualities will not simply be protected but enhanced by a new organisation that will have the scale and financial security to continue to support and build them as we enter into a new and dynamic retail environment.”
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