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Billabong bid dropped to 45 cents?

Media reports have suggested Sycamore Partners have reduced their bid for Billabong International (ASX: BBG) from 60 cents to 45 cents.

The Australian is reporting that Billabong and its advisers have invited a previous suitor, Altamont Capital Partners and VF Corporation into discussions, after the period of exclusive talks with Sycamore ended, without procuring a bid the board was prepared to endorse.

Meanwhile shop-eat-surf.com, a website focused on actions sports industry news is reporting that sources close to the Billabong negotiations have confirmed that VF Corp is no longer involved, but Altamont is still interest in buying pieces of the company. However, the website suggests that that approach would not be in the best interest of shareholders, and also confirmed that Sycamore had dropped its bid.

That may be why Billabong’s shares last traded at 45.5 cents. Billabong’s shares have been suspended since Tuesday, while it continues discussions, and are unlikely to be un-suspended until Billabong makes an announcement about a possible transaction.

The Australian Financial Review is reporting that Sycamore Partners has abandoned a full takeover offer, and is instead looking at a recapitalisation deal. That could see Sycamore take up options, preferred shares or debt in Billabong. According to the company’s latest financial statements, Billabong has total borrowings of $286 million, but with falling earnings, share price or both, may have triggered a breach of its debt covenants.

Foolish takeaway

Long suffering shareholders will likely be hoping for a resolution soon. Several institutional investors have already given up, with Franklin Resources selling down its stake to 6.6%, and US-based TIAA-CREF revealing that it was no longer a major shareholder, offloading more than 10 million shares.

It’s almost hard to believe that Billabong shares once traded over $17 (in 2007), but have declined 97% since then. Over the same period, the S&P / ASX 200 Index (Index: ^AXJO) (ASX: XJO) has lost 11%.

While the situation is still unclear, it may be some time before we know exactly how this is going to play out, and Billabong shareholders will just have to wait it out.

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