Australian surf wear retailer, Billabong International, Friday entered a joint venture agreement with Trilantic Capital Partners (TCP) to accelerate the growth of its Nixon brand. Billabong also announced major restructuring that will see the company shed 400 jobs and close several stores. Billabong acquired Nixon in 2006 for approximately US$55 million and a deferred payment of approximately US$76 million in FY 2012.
The company will shut down 150 stores and cut down its global workforce by around 4 per cent. The move also includes offloading a considerable part of its accessories operations. The two companies will each hold 48.5 per cent of Nixon in the joint venture. Billabong’s net proceeds from the transaction, pegged at US$285 million, will be used to settle debt.
The restructuring announcement saw Billabong’s shares rise by over 60 per cent at market close Friday. The transaction values Nixon, a global brand leader in the youth accessory market, at about US$464 million, representing a multiple of approximately 9.2x LTM EBITDA. The remaining 3 per cent shareholding in Nixon will be bought by company management.
Billabong stated in a release that the transaction reflects the significant strategic value and strong potential of the Nixon brand. Billabong’s shares dropped 12.5 per cent on the highest trading volume in the three months to November last year. Then, the company could not explain the sudden surge in trading volume leading to the drop. The company had warned early last year that it expected its FY11 profit to decline after the Japanese Earthquake and Tsunami disasters.