By Gillian Tan Since neither TPG or Billabong International are...

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.