MOSS ADAMS CAPITAL: Apparel and foowear market monitor highlights notable deals, stock prices and results.
Details on Industry Insight.
Billabong just announced it has sold just over 50% of Nixon. It will also close stores and reduce headcount.
The company indicated in another release that it is not pursuing the nonbinding offer to buy the whole company by private equity firm TPG that was the subject of news reports this week.
Here is information from financial documents the company filed. I added the headings for clarity.
On 17 February 2012 the Group announced that it had entered into definitive agreements with Trilantic Capital Partners for the sale of approximately 48.5% of Nixon. The Group will retain 48.5% of Nixon, while Nixon’s management will purchase a 3% stake.
The transaction values 100% of Nixon at approximately US$464.0 million, representing a multiple of approximately 9.2 times the last twelve months’ EBITDA.
The Group expects to realise net proceeds of approximately US$285.0 million (Net proceeds are approximate and net of all transaction costs and taxes. Net proceeds are pending receipt of final tax opinions and may reduce by up to US$45 million. The Group has sought advice in advance from the relevant tax authorities) as a result of this transaction, all of which will be used to repay existing debt and reduce the limit on the Group’s financing facilities provided by its banking syndicate.
The operating results and assets and liabilities of the business will be deconsolidated from the time all conditions required for contractual completion have been satisfied. It is anticipated the transaction will be completed within 90 days, subject to certain anti-trust approval and customary closing conditions. This transaction is expected to result in a significant one-off gain in the Group’s income statement in the year ending 30 June 2012, which cannot be calculated at this point in time as the transaction has not been completed.
On 17 February 2012 the Group announced that it is undertaking a review of its retail network with a view to closing loss- making stores and stores performing below expectations. While the review remains work in progress it is expected that the number of store closures will fall somewhere in the range of 100 to 150 stores.
As part of this review, the Group is targeting a range of $20 million to $30 million reduction in rent expense and a resultant increase in EBITDA in the range of $5 million to $10 million for the year ending 30 June 2013. The closures will result in a one-off charge in the Group’s income statement in the year ending 30 June 2012, which cannot be calculated at this point in time.
In addition to the above, the Group has also undertaken a review of its cost base and plans to reduce costs by approximately $30 million for the year ending 30 June 2013.
The savings will come from all regions and all areas of the business, including head office overheads; supply chain rationalisation; retail corporate overheads; and streamlining the company’s marketing expenditure.
The store closures mentioned above and the cost reduction program will result in full-time and casual job losses. Full-time job losses will be approximately 400 worldwide, including up to 80 in Australia. The company will seek to minimise forced job losses by redeploying staff from closed stores to other Billabong retail stores wherever possible and through natural staff attrition. The fluctuating nature of seasonal retail and the timing of store closures will impact the ultimate number of casual job losses.
Other than those items mentioned above, there has not arisen in the interval between the end of the half-year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Group, to significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years.
See Page 2 for official Nixon press release: