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Billabong announced early this morning it is acquiring Canadian retailer West 49, Inc.
West 49 operates 138 mostly mall-based stores under five banners in Canada, including five Billabong stores.
West 49 reported a net loss of $2.6 million in the quarter ended May 1. It had no cash or cash equivalents on its books at the end of the first quarter and bank debt of approximately $9 million, according to its financial reports.
Click here to read our Executive Edition interview today with Billabong North America President Paul Naude about the acquisition.
The purchase price is $99 million Canadian ($93.5 million US at current exchange rates). The price includes West 49's debt. Billabong will fund the purchase with its existing loan agreements and the deal is not subject to receiving new financing.
Billabong will pay $1.30 per share, West 49 said, more than double West 49's share closing price of 55 cents Tuesday.
West 49 founder and CEO Sam Baio will stay with the company, and Billabong said it will continue its policy with acquisitions to retain existing employees.
Baio owns more than 5 million common shares and 1.1 million preferred shares. At $1.30 per share, that equates to $7.9 million.
With the purchase, Billabong will own a total of 510 stores worldwide. In North America, the deal will increase its stores from 90 to 230.
Billabong has bought many retailers over the years, including most recently, Becker Surf and online retailer Swell.com.
(Right: Billabong CEO Derek O'Neill. Photo courtesy of Billabong.)
Billabong said in its presentation it will still carry competing industry brands, but also expects to increase its penetration of Billabong-owned brands across West 49’s five banners.
It also said the acquisition should be accretive to earnings in FY 2011 and the company expects significant synergies in FY 2012 from the shift to a more vertical business model.
Billabong also indicated it may eventually expand West 49’s retail footprint in Canada.
Here are the reasons quoted for the acquisition in Billabong’s presentation today.
(Right: Billabong North America President Paul Naude. Shop-eat-surf file photo. All rights reserved.)
On page 2: Billabong's reasons, Canada on the action sports radar