Analysts say an expected $1.10 a share takeover offer for Billabong that pushed the company into a trading halt is likely to be too low to convince most investors to sell.
At least two analysts have said the apparent takeover approach by Billabong director Paul Naude, reported by the Australian Financial Review as being pitched at $1.10 a share, would be too low to convince investors to sell their Billabong shares, which were trading at 98 cents yesterday morning on reports of the approach.
City Index chief market analyst Peter Esho says an offer of $1.10 a share would be hard for the board to sell to investors, given higher private equity bids earlier this year.
"Long suffering shareholders wonât be too pleased with the board accepting and endorsing $1.10 given much higher indicated approaches earlier during the year," he observed in a note on the takeover speculation.
"Those who bought the shares at $0.80 might think differently, but a large majority would be hard to convince at current levels." Mr Esho says the company, through some very discounted and dilutive capital raisings, has now cut its debt burden dramatically, and there is the prospect of a strong earnings turnaround given Billabong's restructuring program under new chief executive Launa Inman.
He also says a rebound in cyclical stocks is potentially in the offing for 2013, which would be likely to lift Billabong higher along with other battered retailers.
"The share price could continue to improve next year, with swings and roundabouts, but this wonât be on corporate activity, instead on a broader market recovery in cyclical stocks," he added.
"If shares start to rise with the overall market, a bid in the mid-$1 range is the very minimum a consortium would need to pitch to make a takeover likely."