Billabong rejects TPG’s offer… For the second time!

For those of you who know me, you won’t be surprised by my interest in this story: Australia + Surfing + M&A activity= Success (on my blog at least…).

Billabong International has rebuffed TPG Capital for the second time in as many days.

Billabong said Tuesday that TPG indicated it would be prepared to increase the indicative price under its proposal to A$3.30 a share from A$3 a share, valuing the company at 841.8 million Australian dollars (US$905.8 million).

But Billabong’s Board unanimously determined the A$3.30 a share offer did not reflect the fundamental value of the company in the context of a change of control, and ceased discussions with TPG.

“However the Board is prepared to engage with TPG or any other party that makes a proposal which is in the best interest of the company and its shareholders,” the statement read.

Separately, Billabong non-executive director, 14.9% shareholder and founder Gordon Merchant and non-executive director and shareholder Colette Paull engaged Minter Ellison as lawyers.

In a letter to Billabong on behalf of Mr. Merchant and Ms. Paull, Minter Ellison partner Bruce Cowley said his clients do not support Billabong taking any steps to assist or facilitate a proposal by TPG Capital.

Mr. Merchant and Ms. Paull said they would not support TPG being allowed to commence due diligence even if the private equity firm lifted its offer to A$4 a share, an amount they believe would still represent a discount on the true value of Billabong’s shares.

The boardsports retailer closed 2.3% lower at A$2.98 a share.

J.P.Morgan Shaun Cousins said in a note, it is less likely that a party such as TPG will be able to meet the Billabong Board’s expectations with respect to price.

“The position of Merchant and Paull, make a direct approach to shareholders difficult. Hence, we believe the prospect of a potentially successful takeover of BBG from a third party is now less likely,” Mr. Cousins said.

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