California Apparel News

After a year of roller-coaster talks and dismissals of various suitors, ailing Australian surf giant Billabong International Ltd. announced June 4 that it will not sell the company. Billabong is one of the pioneers of the surfwear business and still one of its leading brands.

Billabong runs its important Americas division out of offices in Irvine, Calif., and owns some of the most popular brands in the action sports and lifestyle field, such as RVCA and Element. Both are based in Orange County, Calif.

Rather than putting the entire company up for sale, Billabong announced that it will explore “refinancing” options and selling off some parts of its family of brands and retail divisions, said Billabong Chairman Ian Pollard. It is in talks with American firms Sycamore Partners and Altamont Capital Partners for refinancing. Since January, it had been in talks with Sycamore and Altamont for takeover talks. Last year, the company was in talks with TPG International LLC and Bain Capital.

“The refinancing is intended to provide the company with a comprehensive solution and an appropriate capital structure, allowing it to continue its reform agenda,” Pollard said in a statement. “It’s our intention to conclude these discussions as soon as practically possible while aggressively reducing costs across all our global operations.”

Since the announcement, media reports noted the layoffs of several top sales executives at Billabong’s Irvine offices. At the Australian Stock Exchange, where Billabong is traded under the symbol of BBG, the company’s stock price has plummeted more than 40 percent, and on June 4, it was 23 cents per share in Australian currency (or $0.22 per share).

Billabong’s long “will-they-or-won’t-they-sell” story has been keeping the action-sports industry guessing for a long time. It might look messy, but Paul Zaffaroni, director of the investment-banking group of Roth Capital Partners in Newport Beach, Calif., said that lengthy mergers-and-acquisitions deals are not uncommon. It can take six months to one year to execute an M&A deal, and since Billabong is a public company, the anticipation of a possible sale to the disappointment of a deal being taken off the table is played out on the pages of newspapers across the globe.

The best-case scenario for Billabong would be for one of its former suitors to help it refinance its debt, Zaffaroni said. “It’s the best situation because it is hard to focus on the day job if the bank is knocking on your door,” he said.

The worst-case scenario would be for Billabong to sell their most popular brands at a discount. “But they may have to do that to raise cash to give themselves some breathing room with the bank,” Zaffaroni said.

Billabong’s troubles started with a multi-year shopping spree in which it acquired everything from fashion brands such as RVCA to e-commerce retailer Swell.com, core surf bricks-and-mortar chain Becker Surf & Sport and the 138-store Canadian retail chain West 49. But the spree stopped when the global economy sputtered after the financial crisis of 2008.

By then, Billabong had built up a heavy net debt of 152.2 million Australian dollars ($148.44 million), according to results for the half-year that ended in December 2012.

However, it is still considered one of the surfing world’s top brands, said Duke Edukas, co-founder of Surfside Sports in Costa Mesa, Calif. “Billabong has been the leader in our store,” he said. “The thing you have to realize is that Billabong is, by far, the best in most stores.”