Zumiez and Billabong May Be in Bidding War for Canadian Retailer
The largest acquisition of Billabong International LTD’s 37-year history hit a roadblock.
In late June, the Australian headquartered surf manufacturer was moving forward with its acquisition of Canadian retailer West 49 Inc. for $99 million (Canadian.) The board of the 138-store Burlington,Ontario, action-sports retailer had accepted the Aussie company’s offer. Billabong chief executive Derek O’Neill told analysts that he hoped the purchase would help boost Billabong’s profile in Canada and help make a strong market even stronger.
But on July 9, West 49 Inc. announced that Billabong had a rival. Washington-based action-sports retailer Zumiez, Inc. said it would make a “superior” offer to Billabong’s deal to purchase the chain for $1.30 (Canadian) per share.Zumiez has been looking at Canadian retail for awhile. In June, Northwest Atlantic (Canada,) a real-estate brokerage, announced that it was looking for retail space for Zumiez in the Vancouver, British Columbia area.West 49 reacted to the Zumiez proposal by creating a special committee to negotiate with Zumiez. However, the West 49 board made it clear that they will continue to support the Billabong offer, according to a prepared statement from the retailer. The West 49 statement also noted that it was concerned that Zumiez might be a competitor since it announced its intention to expand north.By meeting with Zumiez, the Canadian retailer probably will not be breaking any agreements with Billabong, said Jeff Van Sinderen, a retail analyst for Los Angeles–based financial services firm B.Riley & Co. Most acquisition agreements contain exit clauses in the event a bidding war comes up.
The West 49 board also may have more to consider than big checks from its suitors, Van Sinderen said. In the Billabong agreement, West 49 executives, including chief executive Sam Baio, will remain on board and they will be granted a high degree of independence. Most of the terms of the Zumiez deal are still unknown. There is a possibility that the store’s nameplates could be changed and the current executives might be shown the door.Whatever happens, Canada should continue to be attractive to many American retailers. “Retailers are looking to Canada as an area of growth,” Van Sinderen said. “In some areas Canada is doing considerably better than the U.S. They did not have as much of a blow-up in the economy as happened in the U.S. in the past couple of years.”—Andrew Asch
More about Billabong's offer for West 49 and other recent aquisitions is available here.
