Private equity firm TPG Capital’s offer for Billabong is outrageously low compared to previous fashion label buyouts according to a story in Businessweek.
Excluding extraordinary items, analysts now estimate Billabong will earn A$64.5 million in the year ending June 2012, according to data compiled by Bloomberg. TPG’s offer is worth almost 12 times that forecast, compared with the median bid of 24 times profit for takeovers of apparel makers greater than $500 million in the U.S., western Europe, and developed markets in the Asia-Pacific region, the data show.
In other words, TPG is offering half the average multiple for Billabong. In its analysis Businessweek questions what exactly TPG knows about the company that would cause it to make such a low offer. Are things that much worse than they appear? Or is TPG just out trolling for bargains?
For an in-depth look at the continuing Billabong situation, click the link and read the story. Or check out the Sydney Morning Herald’s piece A Tragedy of Errors.
[Link: Businessweek and Sydney Morning Herald]
I could be wrong but my feeling is that the offer reflects BBG’s situation – they’re a long way down a path that has/is failing the company. It will be a long and expensive process to extricate themselves from the strategy they have set in place. Combined with their debt load and falling sales, the outlook just isn’t as bright as it was for other labels.
Gotcha.
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