Plug pulled on $400 million Rip Curl sale as co-founder cites “cesspit” market conditions

The owners of iconic Australian surfwear brand Rip Curl have dropped plans to sell the company for $400 million because of poor market conditions and have even forecast their departure from the business altogether.

The departure highlights the ongoing troubles with the retail industry, especially in the surfwear market as Billabong suffers similar troubles.

In September last year, Rip Curl appointed Merrill Lynch to investigate sale options for the brand.

Rip Curl co-founder Brian Singer told The Australian plans for the sale of the company had been abandoned.

“I doubt (the sale) is going to happen. The public market looks like a bit of a cesspit at the moment,” Singer says.

Singer went on to predict the founders of the brand – himself and surfing mate Doug Warbrick – would leave the company “at some point in the next few years”.

Rip Curl group advertising and marketing chairman Neil Ridgeway told SmartCompany there are no extra comments on the sale process at this stage.

“The only thing I would say is it’s business as usual here at Rip Curl. So far we’ve been performing solidly this year,” he said.

Rip Curl was founded by surf mates Singer and Warbrick in Torquay in 1969 and has 24 retail outlets across Australian and New Zealand.

Analysts believe the sale of the surfwear brand has been influenced by the recent poor performance and Billabong.

Executive director of corporate advisory Bentleys, David Gordon, told SmartCompany the surf industry is going through a ‘transitional phase’.

“I think that Billabong situation will affect people’s thinking. I don’t necessarily believe that the industry won’t be what it was before, but it is in a transitioning phase.

“Market conditions are probably a relevant reason for what’s going on with Billabong and the whole surfwear industry having to come out of a kind of a regeneration,” he says.

In February Billabong disclosed a half-yearly net loss of $536.6 million, off the back of an annual net loss last year of $275.6 million.

In 2012 Rip Curl also posted a net loss of $3.6 million, and the company said the loss incorporated $4.5 million of costs for a restructure due to take place this year.

Gordon says there is no immediate need for Rip Curl to be sold.

“No one is willing to pay the premium the shareholders want for it [Rip Curl] at the moment, so it makes sense to suspend their sale process.

“I don’t think there is an urgency to sell, apart from the fact that people want to exit,” he says.

Gordon says all the surf brands in Australia have been struggling as the market’s original growth came from a generation which appear to have outgrown the brand.

“The issue is the guys who were buying lots of products from them are now older and are no longer wearing t-shirts and board shorts. Their lifestyle is now different which makes that brand less relevant to them.

“Their challenge now is to ensure that their brand is as relevant to the next generation as it was to their parents. They need to maintain relevance to their age group, as well as ensuring that the older brand loyalists continue to wear it,” he says.

Gordon says the surf brands tried to take a niche product and make it successful internationally.

Gordon says Rip Curl’s decision to maintain its operations in its original location of Torquay and keep its core values intact has helped the brand to survive.

“I personally think it’s a strength, because they have stuck to their core values and what they know they can do, and haven’t channelled money into areas where they don’t have core expertise and might fail.

“They haven’t made massive strategic changes which are difficult to turn back,” he says.

Singer and Warbrick own 72% of Rip Curl, which is chaired by Australia Post’s chief executive Ahmed Fahour.

 

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