Billabong still in talks with TPG

4 Oct 2012, 7:01 pm   -   Source: AAP
Billabong says takeover talks with TPG are continuing despite concern the firm may withdraw its bid. (AAP)

Billabong says takeover talks with TPG are continuing despite concern the firm may withdraw its bid. (AAP)

Billabong says takeover talks with TPG are continuing, although the private equity suitor has some concerns about the surfwear group.

Billabong remains in takeover talks with suitor TPG, despite speculation that the private equity firm is considering withdrawing its $694.5 million bid.

Reports suggesting TPG was considering pulling the pin on proceeding with its takeover caused the surfwear group's shares to plunge by as much as 22 per cent on Thursday before Billabong requested a mid-afternoon trading halt.

But Billabong late on Thursday confirmed that TPG had not withdrawn from the sale process.

However the private equity group does have some concerns about the business, which both parties are working through.

"As part of its due diligence investigations, TPG and its advisers have expressed concerns in relation to some issues, however, discussions in relation to those matters are continuing," Billabong said in a statement.

"Billabong has stressed in each of its previous announcements in relation to the sale process that there is no guarantee that any transaction will eventuate out of the process or that the board will recommend any proposal, and that continues to be the case."

The retailer said it would update the market of any changes.

The Australian Financial Review had earlier reported that TPG was considering withdrawing its $1.45-a-share takeover offer.

Billabong's other private equity suitor Bain Capital pulled its matching $694.5 million offer in September during the due diligence process.

During Thursday's trading session, Billabong's shares to a three month low of $1.015.

By the time the trading halt began shortly after 1400 AEST, the share price had recovered slightly to $1.075.

Cameron Securities client adviser Adrian Leppinus said investors had obviously heard the rumours of a second takeover offer withdrawal, causing the shares to drop.

"TPG are doing due diligence at the moment so whether there was something in the books that they didn't like, only time will tell," he said.

"The issue for Billabong in recent times is that they have rolled out a retail network in some pretty expensive retail locations so any sort of slump in the retail market affects them."

He said, like many Australian retailers, Billabong was also facing stiff competition from overseas online retailers who were offering cheaper products.

The current TPG bid is its second for Billabong this year after it made a $3.30 a share offer in April which the retailer rejected.

TPG made its second and significantly lower offer for the company in July.

Billabong has also said that the $1.45-a-share offer devalued the company.

However, Billabong posted a $275.6 million loss for the year to June 30, a huge drop from the $119.1 million net profit it made the previous year.

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