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Why Billabong International Limited shares soared today

Surfwear maker Billabong International Limited (ASX: BBG) saw its shares soar over 6% to 51.5 cents today, despite no company news and the All Ordinaries Index (index: ^AORD) (ASX: XAO) crashing 0.5%.

Perhaps news that Solomon Lew, chairman of Premier Investments Ltd (ASX: PMV) had taken a stake in takeover target David Jones Limited (ASX: DJS), through his company SL Nominees, led investors to draw a long bow, pointed directly at Billabong.

Mr Lew has form in taking stakes in takeover targets – his 10% stake in Country Road Limited (ASX: CTY) has prevented South Africa’s Woolworths Holdings from taking full control and it’s stuck with an 88% stake. Perhaps it’s no coincidence Woolworths is the party attempting to takeover David Jones as well. Mr Lew also used a 10% stake in retailer Colorado to force Affinity Equity Partners to raise its offer price in 2006.

With Premier Investments sitting on around $300 million in cash, and little debt, it’s likely that any moves Mr Lew makes will be linked to the word ‘takeover’. In David Jones’ case, it appears Mr Lew has spotted an opportunity to force Woolworths to up its offer price, or perhaps gain a bargaining chip in any talks over Country Road?

Mr Lew and Premier certainly have the firepower to make a tilt at Billabong if they wanted to. The question may be, why now and not when the shares were languishing at 10 cents each?



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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

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