Billabong has started selling its Canadian stores, in a move which suggests the troubled surfwear company doesn’t expect any private equity sale to include the current full line-up of retail outlets.
Billabong remains in a trading halt while it continues due diligence discussions with private equity suitors, although the length of the suspension has left some commentators puzzled.
“The fact these guys are taking so long in terms of their due diligence is probably indicative of what both companies want,” says Bentleys partner and retail expert David Gordon.
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A new report from The Australian suggests the business has started selling off its Canadian stores, including the West 49 chain which the company purchased for a massive $91 million in 2010.
Billabong was contacted this morning by SmartCompany, but was not available for comment.
The sale of the Canadian stores is also reported to include six Billabong branded locations, 18 trading under the Amnesia brand, and two others under the Element brand.
The reported sales come alongside Billabong’s announcement last year it would close 160 stores through the current financial year. However, private equity takeover bids have taken up much of the company’s attention.
Gordon says the sale of the locations isn’t surprising – it would be unlikely the company would sell itself intact with so many underperforming stores.
“I don’t think there was ever going to be a full sale of the business,” Gordon says. “Whoever comes along will only want part of the business, and those are the components of the company that have brand value.”
Analysts have suggested that, rather than retail stores, Billabong’s strength lies in its supply chain and brand power. Gordon agrees, suggesting only a relatively small portion of the business has the potential to continue making money.
“This is just confirmation that the company as an operating entity, as it stands, is not viable and even in the short term that will not change dramatically.”
Billabong has remained in a trading halt since May 7 as it conducts due diligence with a consortium of suitors including private equity group Sycamore and Billabong American chief Paul Naude.
“The business cannot stand still,” a spokesperson told The Australian regarding the Canadian sales.
Retail Doctor Group chief executive Brian Walker told SmartCompany the sale reflects the “true value” of the business.