New takeover offer drops in for Billabong: Let the bidding war begin

A bidding war could be on the cards for Billabong after US clothing giant VF Corporation made a takeover proposal which will go head to head with Billabong executive Paul Naude’s buyout offer of $526 million.

VF Corporation, which owns Timberland, Lee, The North Face and Vans amongst others, has teamed with US investment fund Altamont Capital to match the $1.10 offer made by Naude.

Naude made his offer just before Christmas and has been in the process of undertaking due diligence on the iconic surfwear manufacturer and retailer.

After the close of trading yesterday Billabong announced the rival bid to the ASX and said VF would also be given the opportunity to conduct due diligence.

“Billabong will now run a process to evaluate whether a change of control proposal, at a price and on terms that the board would recommend, can be secured. This process is expected to take approximately six weeks,” Billabong company secretary Maria Manning said in a statement to the ASX.

Retail analysts say the new offer could spark a bidding war with the consortium led by Naude.

David Gordon, executive director of corporate advisory at Bentleys Melbourne, told SmartCompany he expected the offer price of $1.10 a share would increase.

“It’s a healthy sign for Billabong because there is now some competitive tension in the transaction, and now you have two parties that have expressed a strong interest at essentially the same price, it will come down to who truly understands the risk value proposition,” he says.

Gordon says it is a positive sign that VF already has streetwear brands within its stable, “that means they have a pool of expertise to call on,” he says.

The key issue for Billabong’s board, according to Gordon, will be whether to stick with new chief executive Launa Inman’s turnaround plans for the surfwear company.

“It is really whether the board believes in the transformation program that Inman is putting in place and whether she can turn it around so that the $1.10 becomes a lot more in the future – that is their decision point,” he says.

“She is definitely making the hard decisions, and she is building her team, but it is easy for her to put a strong corporate team in place. The difficulty is to ensure that the product still resonates with their market and you can only do that with people who understand their consumers and are in touch with surf and streetwear.”