Time running out for Billabong as brand value ‘loses...

Time running out for Billabong as brand value ‘loses $179m’
Published 20 May 2013 10:40, Updated 20 May 2013 12:08
inShare
+font-fontprintEmail page

Bad sign: Billabong’s brand value has shed $179 million in the past year according to Brand Finance. Photo: Ian Waldie

Protracted negotiations to sell Billabong International to private equity could have a lasting impact on the very thing that’s being fought over – the surf wear manufacturer’s brand.

Brand Finance, the global consulting firm that specialises in measuring the financial strength of brands, says Billabong has lost $179 million in value in the last 12 months, more than any other Australian company.

In its annual study, the consultancy found other retail names including David Jones, Harvey Norman and Myer have lost brand value, while ANZ was the biggest winner with an increase in brand equity of more than $2 million.



While brand equity can be difficult to define and measure – financial analysts talk about “goodwill” towards brands as part of their forward looking sales expectations – the extent Billabong’s brand still resonates with customers will be an important consideration for any potential buyer.

Multiple would-be acquirers have run their rulers over Billabong and decided not to move forward with a deal, starting with the $3 per share proposal from American buyout firm TPG in February last year.

Time is fast running out. Unless perceptions can be changed, Billabong will remain a brand of the past rather than being associated with the future.

Most recently, the Sycamore Partners buyout consortium led by Billabong’s US boss Paul Naude has twice extended its exclusive negotiation period and is now believed to be considering a recapitalisation rather than an acquisition of the company.

At 60 cents a share, Sycamore’s buyout discussion is significantly discounted from the $3 per share discussions less than a year ago, which in large part reflects the buyer’s perception of the brand value.

“The historic strength of the Billabong brand has bought the company time to turn itself around. However that time is fast running out. Unless perceptions can be changed, Billabong will remain a brand of the past, rather than being associated with the future,” says Xander Bird, MD of Brand Finance Australia.

According to the Brand Finance study, Billabong’s brand has dropped 24 places since the company first announced its strategic capital review in February 2012 and subsequently became the subject of multiple failed buyout attempts.

Last June, CEO Launa Inman hired consultant Virginia Shiverdecker to research the relevance of the brand and its goodwill among customers. In November Shriverdecker told BRW Billabong still had the opportunity to stand out among its peers thanks to its performance surfing roots.

Gordon Merchant, the surfer who built the globally recognised surfwear company and is supporting the Sycamore takeover proposal, started Billabong in the 1970s through grassroots relationships with surfers pushing the boundaries of the sport.