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Tiffany Montgomery
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Zumiez bids for West 49

By Tiffany Montgomery
July 09, 2010 6:09 AM

Washington-based action sports retailer Zumiez is making a bid for Canadian retailer West 49 a week after Billabong announced is is acquiring the company.

Zumiez has offered to pay "an excess of $1.30 per share." Billabong's offer is for $1.30 for share.

However, West 49's board believes Zumiez bid could lead to a superior proposal. But, since Zumiez recently said it planned to expand into Canada, West 49 wants to "protect its competitive position."

According to a release, it will talk to Zumiez to determine if the offer can become a firm offer that is superior to Billabong's.

If Zumiez does that, West 49 says Billabong will have the right to match it within five days.

However, the board still supports Billabong's bid and believes it is in the best interest of shareholders, according to a statement.

Billabong has said it will finance the acquisition, valued at $99 million Canadian, with its existing credit facilities. At its last reporting period, Billabong had approximately AUS$225 million in net debt (cash minus short and long term borrowings).

West 49 said Zumiez offer is not subject to a financing condition either - meaning it would not need to obtain new loans.

Zumiez had $96.8 million in cash and no debt at the end of the last reporting period.

Zumiez had considered other acqusitions in the past few years. After Active Ride Shop filed for bankrutpcy in 2009, Zumiez explored buying the chain, and 20 of its stores (Active currently operates 21 stores). However, after conducting its due diligence, Zumiez did not make a formal bid during the final auction.

West 49 operates 138 mostly mall-based stores. Zumiez operates 389 mostly mall-based stores in the U.S.

Billabong owns approximately 372 stores around the world.

Read our previous interviews with Billabong North America President Paul Naude and West 49 CEO Sam Baio about Billabong's proposed acquisition of West 49.

Here is the release:

Burlington, Ontario, July 9, 2010 - West 49 Inc. (TSX: WXX) (the "Company"), Canada’s leading action sport retailer, today announced that Zumiez, Inc., a U.S.-based action sports retailer, has advised the Company that, subject to a satisfactory due diligence review in its sole discretion, it “would be prepared to make an offer, that would not be subject to a financing condition, to acquire all of the outstanding common shares and preferred shares of West 49 for a cash price in excess of C$1.30 per share”. Zumiez, Inc. has further indicated that it believes that its acquisition proposal would reasonably be expected to lead to a superior proposal, and has indicated that it would like to enter into a confidentiality and standstill agreement with the Company.

The Company’s board, after consultation with its outside legal and financial advisors, has concluded that the Zumiez proposal would reasonably be expected to lead to a superior proposal. However, the Company is concerned with Zumiez’s previously stated intent to enter the Canadian market, and therefore the board has instructed the Company’s management to seek to protect the Company’s competitive position. Subject to the terms of the existing agreement with Billabong International Limited, the Company’s special committee intends to seek to negotiate with Zumiez to determine if its offer can become a firm offer that is financially superior to the transaction with Billabong and that West 49 can otherwise treat as a superior proposal under the terms of the existing agreement with Billabong. There can be no assurance that Zumiez will in fact make a firm proposal or, if it does, as to the price, terms or conditions thereof. In the event that Zumiez does make a proposal that the board determines constitutes a superior proposal which the Company wishes to accept, Billabong would have the right, but not the obligation, to match such proposal within a 5 business day period.

The special committee and the board as a whole confirm that they continue to support the Billabong transaction and confirm their unanimous conclusion that the transaction with Billabong is in the best interests of the Company and is fair to the Company’s securityholders and their recommendation that securityholders vote in favour of the Billabong transaction, under which the Company’s common shares and preferred shares would be acquired at C$1.30 per share. The agreement with Billabong remains in effect at this time. Further details of the Billabong transaction are expected to be included in a proxy circular to be mailed to shareholders in due course.


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