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.
Nixon sale
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.
Aims to close 100 to 150 stores
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.
400 full time jobs to be eliminated
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:
Click here to see a list of Triantic Capital Partner’s current investments
BILLABONG ESTABLISHES NIXON JOINT VENTURE; VALUES NIXON AT US$464 MILLION
GOLD COAST, 17 February 2012: Billabong has entered into definitive agreements with Trilantic Capital Partners (“TCP”) to establish a joint venture to accelerate the growth of the Nixon brand globally.
Billabong and Trilantic will each hold approximately 48.5% of Nixon, a leading brand in the global youth accessory market, and management will purchase the remaining 3.0% stake.
Billabong expects to realise net proceeds of approximately US$285 million as a result of this transaction, all of which will be used to repay debt.
The transaction values Nixon at approximately US$464 million, representing a multiple of approximately 9.2x LTM EBITDA .
The transaction reflects the significant strategic value and strong potential of the Nixon brand.
Derek O’Neill, CEO of Billabong, said: “Nixon has achieved strong growth since Billabong’s acquisition of the brand in 2006. Nixon is now well placed to grow deeper into accounts such as existing Nixon retailers, specialty watch and fashion retailers as well as select consumer electronics stores. The partnership with Trilantic gives Nixon the financial backing and impetus to achieve this growth.”
Charlie Moore, partner at TCP, said: “We are thrilled to be partnering with Billabong and with Nixon’s founders, Andy Laats and Chad DiNenna, to support Nixon in its next phase of growth. Nixon is the pre-eminent watch and accessories brand in the action sports category with tremendous brand loyalty and momentum. We look forward to working with the Nixon team as it expands the reach of its brand and products into new channels and markets.”
Nixon’s Co-Founders, Andy Laats and Chad DiNenna, will continue their roles as CEO and EVP of Marketing, respectively, while together holding a significant equity investment alongside the rest of Nixon’s senior management team.
Andy Laats said: “This is exciting news. To be back in the owner’s seat with this committed team in addition to the forces of Billabong and Trilantic represents the next step in our continued mission to elevate Nixon to a world-class brand.”
The transaction will be funded through equity from TCP and its affiliates of US$140 million, as well as equity from management.
In addition, US$175 million of underwritten debt financing has been obtained to fund the transaction. The debt package is non-recourse to Billabong and will not be consolidated.
Billabong acquired Nixon in 2006 for approximately US$55 million and a deferred payment of approximately US$76 million in FY 2012.
The transaction is expected to close within 90 days, subject to certain anti-trust approval and customary closing conditions.
About Nixon Inc.
Nixon is a leading brand in the global youth accessory market. It has been voted #1 best seller in the USA and Canada, and has been the recipient of numerous industry awards. The brand is carried by more than 70% of US surf and skate retailers and is supported by an outstanding team of professional board sport athletes and entertainers. Over the last 10 years, the Nixon brand has established a reputation for shaping trends in the action sports and youth fashion arena.
About Trilantic Capital Partners
Trilantic Capital Partners is a private equity firm focused on control and significant minority investments in North America and Europe, with primary investment focus in consumer, energy, financial services and business services. Trilantic Capital Partners was formed in 2009 by the former principals of Lehman Brothers Merchant Banking (“LBMB”), where they established LBMB, and now Trilantic, as a partner of choice for management teams, entrepreneurs and family-owned companies. Trilantic currently manages two institutional private equity funds with an aggregate capital commitment of $3.8 billion. For more information, visit www.trilanticpartners.com
