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Dumped: Billabong founder seeks new bid
PUBLISHED: 19 HOURS 49 MINUTES AGO | UPDATE: 16 HOURS 4 MINUTES AGO
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CARRIE LAFRENZ
Billabong founder Gordon Merchant has thrown the door open to another takeover bid, saying he felt “bad” about rejecting a private equity offer four months ago and was now prepared to accept less.

Billabong shares nearly halved in value yesterday and have plunged by 60?per cent to 96¢ since the company rejected TPG’s sweetened $3.30 a share offer, valuing the company at $850?million, in ­February. “I feel bad about the whole situation,” Mr Merchant told The Australian Financial Review from South Africa, where he is holidaying with his family.

Mr Merchant is Billabong’s largest shareholder, with 15.6 per cent.

“I thought it was the right decision at the time . . . No one has lost more money than I have,” he said. “I don’t have any set figure in my head, but I would consider [a lower offer than $4 a share].”

Mr Merchant, who said in February he would not consider any offer under $4 a share for the surfwear group he founded in 1974, has changed his view on value after the company issued another profit downgrade and launched a heavily discounted capital raising last week.

He said he had made his initial decision as a “shareholder, not as a director” and said the company’s earnings had deteriorated rapidly since then.

His comments came as Billabong’s major institutional shareholders called for his removal from the board.

“Regardless of whether you own 100 shares or 15 per cent of the company, directors need to remove themselves from their own personal motivations and biases and act on behalf of the interests of all shareholders, something we felt did not happen in February when TPG made their approach,” Colonial First State fund manager Marcus Fanning said yesterday.

“There is a fair bit of work to be done with Billabong and it might be best done in the private world, something we expressed to the chairman [Ted Kunkel] when they quickly rebuffed the approach by TPG.”

Mr Fanning’s comments echoed that of Billabong’s largest institutional shareholder, Perennial Value. Asked yesterday if he would consider the request to step down, Mr Merchant said: “No, not at this point.”


But he said he would seek discussions with shareholders when he returned to Australia.

Mr Merchant raised eyebrows when he declined to take up his full entitlement of shares under the capital raising launched by new chief Launa Inman.

But he said taking up 85 per cent of his rights for $30 million did not signal a lack of support for the company. “It was difficult to raise that amount of capital in that short time,” he said.

Institutional shareholders are considering whether to call on the company to hold an extra ordinary meeting to remove Mr?Merchant as a director.

The surf retailer has been criticised by shareholders for knocking back the TPG offer, selling half of watch brand Nixon and launching a highly dilutive equity raising last week.

Billabong sold half of Nixon to private equity in April for $US285 million in a bid to pay off debt. Shareholders argued the company should have sold the other half of Nixon rather than conduct last week’s share sale.

Given the steep decline in the share price, market sources have speculated about another takeover offer for Billabong.

Private equity groups TPG, Bain Capital and Blackstone and the world’s largest athletics company, Nike, are among potential buyers.

Nike and Billabong co-sponsored the richest surfing event in Australia’s history at Manly in January.

It is believed that Perennial Value, Franklin Templeton and Colonial took up their full entitlements in the capital raising, while Baillie Gifford has been selling the stock.