Matthew Smith Reporter

Matthew Smith has been a business and financial journalist for more than a decade. He previously worked with the Financial Times Group, reporting from New York on company buyouts and refinancing in the wake of the Global Financial Crisis. He started his career reporting on the funds management industry in Sydney.

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Wipeout: Gordon Merchant down $600m from Billabong’s 2007 peak

Published 10 April 2013 12:30, Updated 11 April 2013 06:38

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Wipeout: Gordon Merchant down $600m from Billabong’s 2007 peak

Gordon Merchant, Billabong founder, has agreed to trade all his shares in Billabong for shares in the new privately-owned company if the bid goes ahead. Photo: Arsineh Houspian

Gordon Merchant, the surfer who built globally recognised surfwear brand Billabong, has had almost two-thirds or around $600 million wiped off his net wealth since the company he created reached its peak valuation six years ago.

When it was trading at its peak, shares of the listed surfwear manufacturer, Billabong International, were trading at $18. Yesterday, the company said via an announcement to the ASX that Merchant and fellow director, Colette Paull, will support a bid to take the company private for 60 cents per share.

Merchant, who owns 14.3 per cent of the company, and Paull, who owns 1.2 per cent (according to Bloomberg) have agreed to take shares in the new privately-held company that will be created if the buyout consortium comprising of Billabong Americas division head Paul Naude and US PE firm Sycamore Partners decide to proceed with the 60 cent per share bid.

Merchant, the Maroubra local, who relocated to the Gold Coast to start Billabong in 1973, after falling in love with the southern Queensland coastal town known for its consistently epic surf breaks, has agreed to trade all his shares in Billabong for shares in the new privately-owned company as a show of support for the buyout.

The buyout consortium said it will announce whether it intends to go ahead with the 60 cents per share acquisition by Monday, April 22 – ten business days from Tuesday’s ASX announcement. The potential acquisition will hinge on the findings of a fresh due dilligence process and an iron clad financing arrangement. The Australian Financial Review reported that PwC has been appointed to conduct the fresh audit.

Merchant’s net worth has dipped dramatically at times in the last year or so at the whims of the numerous buyout attempts for the company.

Most recently – before the company went into a trading hold on 2 April – the 73 cent trading price would have valued Merchant’s net wealth at $361 million, $9 million more than what he is worth in the context of a buyout valuing the company at 60 cents. At the time of his inclusion in BRW’s 2012 Rich 200 in May last year, Merchant was worth closer to $420 million.

But even that was a long way from Merchant’s peak Rich 200 ranking of $904 million in 2007.

Since then the company has traded down on earnings downgrades and failed buyout attempts by US PE firm TPG at $3.30 per share in February last year, and subsequent competing bids from TPG and Bain Capital at $1.45 per share in July.

But Merchant, with his agreement to take shares in Billabong’s new private ownership, will expect he can rebuild what has been taken away in the last five years thanks mainly to the dramatic shift in retailing and the watering down of its once performance-oriented surfing brand.

Over the years the Billabong brand has been synonomous with names of great surfers through the decades including Wayne Bartholomew, Mark Occhilupo, Shane Dorian, Luke Egan, Taj Burrows, and current Association of Surfing Professionals (ASP) world champion Joel Parkinson.

Merchant originally built the Billabong brand through grass roots relationships with surfers who were continually pushing the boundaries of the sport, and that’s where Merchant is expected to focus if the company ultimately is removed from the public market gaze as seems inevitable.

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