Billabong’s Potential Buyer Is a Company Man
Paul Naude, president of Billabong International Ltd.’s Americas division, is holding discussions to put together a leveraged buyout of the beleaguered surf giant, which is headquartered in Australia.
In a Nov. 19 statement, Billabong announced that Naude will step aside for a period of six weeks from his responsibilities as president of the Irvine, Calif.–based Americas division and as a director on Billabong’s board while he tries to put together a deal.
The announcement is the latest turn in a very dramatic year for Billabong, which remains one of the surf world’s most popular labels. Former Chief Executive Derek O’Neill was ousted after Billabong reported in February a more than 70 percent drop for its first six months’ earnings to 16 million Australian dollars. He was replaced by Launa Inman, a former managing director of Target Australia. She commissioned a study to reform the company. The study called for increased investments and marketing for some of Billabong’s American brands, such as RVCA, Element and Da Kine.
During this time, two separate companies made offers for Billabong, and both, TPG International LLC and Bain Capital, investigated the risk associated with the company. They then withdrew their offers.
Adding to the turmoil, the company announced on Nov. 16 that Ted Kunkel, the longtime chairman of the company, would retire effective immediately.
Independent active-sports analyst Jeff Harbaugh said he thinks the already debt-laden Billabong could run into trouble if more debt is piled on with a leveraged buyout.
“You remember that Billabong had to sell half of Nixon [an accessories brand] and then, a few months later, raise additional equity to address concerns about its balance sheet. By definition, in a leveraged buyout, their balance sheet would deteriorate again as they added the debt used to purchase the company to do it,” Harbaugh wrote in a Nov. 19 research note.—Andrew Asch
