A few days ago TPG, the private equity firm which has been sniffing around Billabong for a year or so, decided that even at $1.45 a share, it wasn’t worth it. This is despite making a $3.30 bid earlier in the year which was rejected because Gordan Merchant believed it needed to be over $4 to be worth looking at. Oooops. The market reaction was swift slashing the price to 83.5 cents and according to this Bloomberg article, “Deutsche Bank AG, which had a share price forecast of A$1.10 for the stock on June 28 before adjusting it to align with TPG’s A$1.45 offer, cut its 12-month estimate to 85 Australian cents after the announcement.“
What does this mean for the company? Short term, it’s looking at purchasing one of Felix Baumgartner’s space suits because a price fall this fast requires some protection. Medium term it is going to be a rough(er) ride. Long term the company is stuck with their restructuring plan outlined earlier in the year – which, as I noted, was all about waiting for the consumer to tell them what they want and then providing it too late, rather than using their brand roots to define products the consumer really desires. Like they used to.