Boardriders to acquire Billabong International Limited for $198 million

Iconic surf brand Billabong International Limited (ASX:BBG) has announced this morning that it has entered into an arrangement with American firm Boardriders, Inc to sell the company for approximately $198 million.

Boardriders will buy all shares in Billabong, other than those already owned by its related parties for $1.00 cash per share. Boardriders is controlled by fund manager Oaktree Capital Management, which owns 19% of Billabong’s shares that will not be purchased under the arrangement.

Billabong’s directors have unanimously recommended the takeover bid and have advised Billabong shareholders to vote in favour of the deal.

The $1.00 bid price represents a 4.2% premium to Thursday’s closing price of $0.96 and a 28% premium to the stock’s closing price of $0.78 on November 30, the day before Billabong had received a non-binding proposal from Boardriders.

The acquisition implies an enterprise value of $380 million for Billabong and values the company at 7.4 times its EV/pro forma 2017 EBITDA excluding any significant items.

The takeover bid is still subject to necessary shareholder and regulatory approval. Significant Billabong shareholders Centrebridge and Gordon Merchant have both indicated that they intend to vote in favour of the deal.

Together, they control approximately 39% of the shares eligible to vote. Billabong shareholders are expected to vote on the offer at a meeting to be held in March 2018 and subject to the necessary approvals it is expected to be implemented in April 2018.

Trading Update 

Billabong also provided a trading update this morning where it reaffirmed the guidance it provided at its AGM. The company expects FY18 EBITDA (excluding significant items) to be in between the range of last year’s EBITDA of $51.1 million and $54 million.

The company’s results during the crucial holiday trading period were at the lower end of its expectations and management expects growth in the second half of FY18 to offset the weakness in the first half given the increasing share of earnings in the Americas and Europe.

With large shareholders intending to vote in favour of Boardriders’ takeover it is likely the bid will be approved.

It brings to an end a tumultuous journey for long term Billabong shareholders. The company once had a market capitalisation of nearly $4 billion in 2007, but it has since struggled from a large debt burden due to mistimed expansions and general industry decline which saw its brands fall out of favour with consumers.

Long term shareholders should be disappointed after previous bids which valued the company higher than the current bid were rejected, most notably from TPG Capital Management in February 2012 which valued Billabong at $850 million.

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Motley Fool Contributor Tim Katavic has no financial interest in any company mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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