Billabong shares have slumped around 10 per cent on a profit downgrade, despite confirmation of a $527 million takeover offer.
Billabong has confirmed that it has received a takeover offer pitched at $1.10 a share from a consortium comprising one of the company's executive directors Paul Naude, Sycamore Partners Management as an equity investor, and Bank of America Merrill Lynch as the lead provider of debt for the deal.
The offer of $1.10 cash per share values Billabong at just under $527 million, which is well below several previous takeover approaches for the company.
Billabong says the consortium's bid is confidential, indicative, non-binding and conditional.
Some of the conditions include: completion of due diligence (which would allow the consortium to review Billabong's finances); finalisation of binding agreements with the consortium's financiers; no dividends to be paid by Billabong after the date of the proposal; as well as acceptance by 90 per cent of shareholders and regulatory approvals.
There was some doubt over whether the bid remained on the table after media .
However, Billabong confirmed with Mr Naude this afternoon that his offer remains on the table notwithstanding the disclosure of key details, and also despite a profit forecast downgrade by Billabong this morning.
The takeover bid has dropped the confidentiality condition.
Goldman Sachs and Allens are acting as advisers to Billabong, which says it will consider Mr Naude's offer and will update the market as soon as possible.
Earnings downgrade In a potential blow to the company's takeover defence, it has lowered its profit forecast for the current financial year, based on a worse than expected performance in November and early December.
, the company has forecast pre-tax and interest earnings of around $100-110 million.
Based on the company's November accounts and preliminary sales figures for the first half of December, the surfwear retailer now expects to deliver an $85-92 million pre-tax and interest profit before one-off costs.
With one-off costs currently estimated at $29 million, that leaves the company's forecast earnings around $56-63 million.
However, the company warns that it may also incur impairment charges in the value of its assets, as part of a review of its asset values triggered in part by a significant gap between the market capitalisation of the company and its shareholders' funds.
Billabong shares had slumped 13 per cent to 85.5 cents by 3:00pm (AEDT) on news of the profit downgrade.
Billabong's new chairman, Ian Pollard, says the board understands investor concerns and will consider all serious takeover offers, but believes the company does have a strategy to turn around its poor performance.
"Over much of the past three years it [Billabong] has been seeking to manage volatile and at times unprecedented trading conditions in all markets and has been the subject of several approaches, including Mr Naude's," he noted in a statement.
"Under CEO Launa Inman, the management team is undertaking a series of actions it can control.
"The board supports the transformation strategy, which has already delivered some early improvements in operations and managing costs."