By Gillian Tan Since neither TPG or Billabong International are disclosing what led to the buyout firm's abandonment of a takeover, Citi analyst Craig Woolford has offered a couple of answers. "The fact TPG spent six weeks looking at the business and felt proceeding with a takeover was not worthwhile is a concern," mused Mr. Woolford, adding that Bain Capital took just one week to reach the same conclusion. The broker believes TPG was unable to gain comfort over the visibility for future earnings due to the underlying health of the Billabong brand or the sales decline in Europe. Referring to the brand's health, Citi noted that data from core surf-specialty stores in the U.S. indicates Billabong is losing market share to brands including Quiksilver. Examining Billabong's European business in the light of retail-spending weakness in Spain, Italy, the U.K. and France, Mr. Woolford points out that the company's retail and wholesale operations are vulnerable. "In retail, the fixed obligations of store leases will hurt as sales decline, [while] in wholesale the fixed overhead of distribution cannot be cut quickly," he said. Separately, Credit Suisse -- who co-advised TPG on its tilt for Billabong -- reinstated coverage of Billabong with a price target of just 41 cents a share, less than half its last-traded price of 83.5 cents a share.
BBG Price at posting:
68.5¢ Sentiment: None Disclosure: Not Held