Embattled surfwear giant Billabong has inked a deal to solve its debt dilemma which will see it switch its current CEO Launa Inman for a former vice-president at Nike.
As previously reported on ragtrader.com.au, Billabong announced on May 9 that it was in discussions with Altamont Capital Partners (“Altamont”) and Sycamore Partners regarding takeover proposals, the proceeds of which would be used to repay in full the company’s existing syndicated debt facilities.
Following a long, drawn-out process, Billabong has today confirmed it has entered into agreements with entities advised by Altamont and entities sub-advised by GSO Capital Partners1 (the credit arm of the Blackstone Group. Together with Altamont, this group - the Altamont Consortium - will allow Billabong to immediately repay in full its existing syndicated debt facilities.
The company has also entered into commitment letters with the Altamont Consortium and GE Capital to provide a long term financing package for Billabong.
As a condition precedent to this significant investment by the Altamont Consortium, Billabong has been required to make significant changes to its management structure, including the appointment of Scott Olivet as managing director and CEO of Billabong.
As a result of the appointment of Scott Olivet, Launa Inman will step down from her role as CEO, after only 14 months in the role. Inman will also withdraw from her position as a director of the company.
Billabong said “the company is working with Scott to finalise the terms of appointment to reflect his global experience and a US private equity style package”. Such terms will be announced with the finalisation of the transition from Inman to Olivet.
The company said Olivet is a “well regarded action sports executive”, whose previous experience includes chairman and CEO of Oakley, Inc. and vice president of Nike Subsidiaries and New Business Development, where he led the portfolio of non-Nike brands, including Converse and Hurley, both of which reported to him.
While at Oakley, Olivet also drove 14 per cent compound annual growth in EBITDA and delivered an annualised return to shareholders of 28 per cent until its ultimate acquisition by Luxottica.
Most recently, Olivet served as chairman of Collective Brands where he led the company's strategic review and ultimate split/sale of the business. Olivet currently serves on the board of Skullcandy, an action sports based electronics and lifestyle company.
As part of his commitment to Billabong, Olivet has also stated that he intends to purchase up to 15 million shares in Billabong. At $0.23 per share, Olivet's total obligation to purchase shares would be AU$2.53 million.
In addition, Billabong has also announced that “in order to further adequately reflect Altamont's significant investment in the company, Altamont will be permitted to nominate two representatives to the board of Billabong”.
The two representatives are Jesse Rogers and Keoni Schwartz, each of whom will be appointed as additional directors by the board and will be put forward for election at the next annual general meeting of the company.
Rogers is a co-founder and managing director of Altamont. Previously, Rogers co-founded and was co-principal managing director of Golden Gate Capital (“GGC”). Schwartz is a co-founder and managing director of Altamont.
The immediate refinancing will be by way of a bridge financing by the Altamont Consortium of the company's existing syndicated debt facilities and the sale of the DaKine brand. The long term financing will be by way of an Altamont Consortium term loan and convertible note, and a revolving credit facility provided by GE Capital.
This financing package is intended to provide Billabong with a flexible capital structure to allow it to stabilise the business, address its cost structure, and pursue a strategy to grow the business.
The sale of adventure sports accessories brand DaKine to Altamont is for a purchase price of AU$70 million. The transaction is subject to conditions precedent which are typical for a transaction of this type and is also conditional on the completion of the funding under the Bridge Facility. It is therefore expected that the DaKine transaction will also complete on or around July 22, 2013.
Billabong’s other brands include Kustom and Element. It sold its successful Nixon accessories brand for approximately $285 million last April to Trilantic Capital Partners.
Commenting on the changes, Billabong chairman Ian Pollard said they would provide a more “stable platform” for the company to regain ground and continue to grow.
“The board believes that the Altamont Consortium’s refinancing, and the changes being announced today, provide the company with a stable platform and the necessary working capital to continue to address the challenges it faces. We had highlighted the company's debt issues previously and it was imperative to deliver a refinancing that retained an opportunity for shareholders to participate in the future of the company. The Altamont Consortium presented the best available, certain and executable opportunity in these challenging circumstances,” he said.
“The transaction reflects the Altamont Consortium’s confidence in the value of Billabong’s brands and our company’s ability to achieve future profitable growth.”
Going forward, Billabong intends to convene a meeting of shareholders to approve the issuance to the Altamont Consortium of the RPS and relevant options.