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A New York hedge fund that began buying Billabong shares in June has inserted itself into the Billabong imbroglio by demanding a special shareholders meeting be called and that most of the board be dismissed.
Coastal Capital International, which currently is a 5% shareholder of the company, wants shareholders to vote on the following items at a special meeting:
* That Billabong amends its constitution to require shareholder approval for future debt or equity financing arrangements
* That Coastal Capital representatives be appointed to the board
* The removal of all members of the board of directors except large shareholders Gordon Merchant and Colette Paull.
Billabong is currently in the midst of closing on a board-approved refinancing agreement with Altamont Capital Partners. While that agreement would install the well-regarded Scott Olivet as CEO and secure long-term financing for Billabong, some shareholders are upset about the dilution to current shareholders.
While Billabong is working on closing the deal with Altamont, it is also considering an unsolicited alternate refinancing proposal from Centerbridge and Oaktree.
Under the Corporations Act in Australia, Billabong will have to hold the extraordinary meeting requested by Coastal Capital within two months.
Theoretically, Billabong will have closed on one of the two refinancing transactions on the table by then. The Altamont refinancing package is expected to close in a few weeks.
Coastal Capital International has very little company information listed on its website, and I am told it has never been in contact with Billabong before this recent move. (See Page 4 for bios of the principals of Coastal Capital.)
Some of the changes Coastal Capital is requesting would require a lot of support from current shareholders. Amending the company’s constitution requires that 75% of shareholders agree, and removing directors requires that 50% of shareholders approve.
In a statement released in Australia, Coastal Capital International said in part, “Given the proposed magnitude of dilution of economic value by the Altamont transaction, it is imperative that any decision to proceed any further with the transaction or any other strategic transaction be approved by shareholders. Specifically, any transaction component involving a third party receiving options, new shares, or debt convertible into economic interests specifically should require shareholder approval as a pre-requisite.”
The Coastal demands are the latest wrinkle in the Billabong spectacle, which has dragged on for about 550 days since the first acquisition proposal from TPG.
Since then, Billabong has tried to restructure internally and compete in a challenging marketplace amidst takeover uncertainty and the departures of some key staff members.
“We don’t see any reason to delay the refinancing process at all,” Billabong spokesman Chris Fogarty told me in an interview this morning about the new Coastal Capital development. “It’s really important for our team globally to get on with the task of rebuilding Billabong and that continues to be our primary focus.”
Altamont, which is committed to the Billabong deal but keeps having to respond to new developments in the ongoing process, said in a statement, “The Altamont Consortium transaction means Billabong, after many months of uncertainty, finally has a clear path toward the future and to realizing the tremendous potential we see in its portfolio of exceptional brands.
“Most importantly, our interest in creating fundamental value is clearly aligned with Billabong's shareholders. We are here as committed long-term partners for the company and will continue to work with the board, Scott and the rest of the management team to reinvigorate Billabong’s businesses and brands, and to restore shareholder value.”
See Page 2 for full statements from Coastal Capital International, Billabong and Altamont Capital Partners