final bid of $1.80?, page-5

Billabong (BBG)

Thus far, I’ve been reluctant to buy into Billabong, but the situation has now changed and there could be some gains here.

When it was first announced that private equity group TPG had come back with a $1.45 indicative bid, the stock was trading at around $1.40 and had recently drifted back into the $1.20s. I recommended staying away because there was only one bidder, they hadn’t made a formal bid and the company was not a business I wanted to own in the absence of a bid.

What’s changed is another bidder has appeared. I think it’s Bain, another private equity firm, but I don’t know and it hasn’t been formally announced, so investors should be cautious. What is interesting is they’ve only indicated the same price as TPG.

There is still no formal bid on the table, though. People who are optimistic about the situation now expect both companies to do due diligence and then decide how much they really want to or can bid.

So although the stock has risen – it closed today at $1.42 – I think it’s probably now worth buying for several reasons. Firstly, there are possibly two competing private equity bidders. Secondly, with two private equity bidders and the very high likelihood that the stock will be taken off the table, the chance of an industry bidder now appearing is a lot higher. No industry bidder has appeared, but an industry bidder would probably pay a lot more than a private equity bidder.

The situation is not without risk because neither bid is formal at the moment. Both bids are conditional upon due diligence, but where you have two players it’s a much better situation than one.


http://www.eurekareport.com.au/article/2012/9/10/mergers-and-acquisitions/brighter-billabong-outlook#ixzz264oI9LAQ