I sold yesterday-maybe to early, but happy with 20% profit. My reason to sell was based souly on gut feeling. Hope to stock goes to 1.40 for the brave. I would buy back at .80, as reward would be worth the risk.
Below is an artical from this weeks Eureka Report by Tom Elliot.
Shortly after Eureka Report published last Monday evening, an alternative proposal for Billabong surfaced – the fifth approach in 12 months for the ailing surfwear company. However, I really don’t think this changes anything for investors and I would continue to stay away.
The new offer from clothing company VF Corporation, known for the North Face, Vans, Riders and Nautica brands among others, and private equity firm Altamont Capital Partners, proposed $1.10 a share cash for the company, and “is subject to due diligence and conditional upon a number of other matters equivalent to those in the [pre-existing] proposal”. The company has granted due diligence and former North American head Paul Naude is already doing due diligence on a potential leveraged management buyout with Bank of America Merill Lynch, also at $1.10 a share.
The problem is, both of these bids are in the very early stages; they’re both just doing due diligence. The shares jumped up to $1.02 in the week, but some reality is setting in and Billabong closed today at $1.005, still 10% shy of the bid. I think the fact VF/Altamont aren’t overbidding Naude – instead lobbing at the same price, subject to due diligence – tells you they’re not overly keen to get it.
VF does already have a variety of leisurewear brands, and Billabong would fit in, and there’s also talk of a potential break-up of the assets. But, as we’ve seen, every time a group gets in the data room to look at this company they find things not to like. We don’t know if it’s market data, demographics, or something else – the problem is that it’s not a bid until it’s a bid. When these sorts of highly conditional bids or proposals are made, the bidders don’t have to give any reasons to walk away.
Granted, Naude knows the company inside out, and you’d think his bid would be likely to go through. But remember he’s got private equity backers, and they might not be as committed to it, or view it as favourably, as him. The proposal from VF is partnered with private equity as well, and we just don’t know the situation there.
So, I don’t think it’s a buy; in fact, if anything, I think it’s a sell. I don’t think the 10-15% of upside here warrants the downside potential if both these groups walk away.
BBG Price at posting:
83.1¢ Sentiment: None Disclosure: Not Held
