Billabong to acquire Canadian West 49

30 Jun '10

5 min read

“We already have a good understanding of each others business and we have worked closely together to develop the Billabong Canada retail stores. Culturally we are a great fit and the fact that we already have a close relationship with West 49 means that the transaction makes even more sense.”

Mr Baio, West 49's founder and Chief Executive Officer, said the combination presented significant transferable expertise for both businesses and he welcomed the opportunity to leverage Billabong's suite of leading brands within each of the West 49 banners to drive future growth.

“Billabong and West 49 have complementary skills and strengths. We relish the opportunity of working more closely with each of Billabong's brands and to drive further growth within the business,” said Mr Baio.

Mr Baio will continue to lead and grow the business. All employees, along with the current management team, are being retained, consistent with Billabong's successful approach to integrating previous 'bolt-on' acquisitions.

The purchase price represents an enterprise value of C$99.0 million (A$110.4 million) based on a fully diluted equity value of approximately C$90.2 million (A$100.6 million) and net debt of C$8.8 million (A$9.8 million) as of 30 April 2010. The transaction will be funded from Billabong's existing debt facilities. The offer represents an FY2011 EBITDA multiple of 10.4x based on consensus EBITDA forecasts1. The acquisition is expected to be earnings per share accretive in FY2011 and acquisition ROCE is expected to exceed Billabong's pre-tax WACC in FY2012.

The transaction, unanimously recommended by West 49's board, will be effected by way of a statutory plan of arrangement and is subject to the approval of not less than two-thirds of the votes cast by West 49 securityholders at a special meeting expected to be held in August 2010. Billabong has entered into support agreements with major securityholders in favour of the transaction representing approximately 56%2 of the outstanding securities. The Agreement with West 49 and the support agreements contain non-solicitation provisions subject to customary “fiduciary out” provisions.

The transaction is subject to Canadian court approval as well as customary closing conditions and is expected to be completed in September 2010. Upon completion of the transaction, the West 49 shares will be delisted from the Toronto Stock Exchange.

West 49 Inc. is a leading Canadian specialty retailer of fashion apparel, footwear, accessories and equipment related to the youth action sports lifestyle. West 49's stores, which are primarily mallbased, carry a variety of high performance, premium brand name and private label products that fulfil the lifestyle needs of identified target markets, primarily tweens and teens. At January 30, 2010, the Company operated 138 stores in nine provinces, under the banners West 49, D-Tox, Off The Wall, Amnesia/Arsenic and Billabong. The Company's common shares are listed on the Toronto Stock Exchange under the symbol WXX. The Company has approximately 64 million shares outstanding.

Billabong International Limited

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