After more than a week of speculation, private equity firm TPG has withdrawn its $694.5 million takeover offer for troubled retailer Billabong, causing its share price to plummet.
The surfwear retailer had been negotiating a $1.45 a share takeover offer with TPG when the private equity firm pulled its bid on Friday.
"The board and management were very constructive throughout the process and laid out a credible performance improvement plan, but ultimately TPG decided to withdraw the offer," a source close to TPG said.
TPG is the second private equity firm to walk away from its takeover offer for Billabong in recent weeks.
Bain Capital made a matching bid for the retailer in September, only to pull the offer a few weeks later during the due diligence phase.
After the latest rejection, Billabong shares tumbled 18.5 cents to an intra-day low of 82 cents, before rallying slightly to close at 83.5 cents, a 16.9 per cent drop on Thursday's close, and a record closing low for the stock.
Cameron Securities private client adviser Henry Jennings said the market had expected TPG to pull the pin on the takeover after speculation circulated last week that it was going sour on the deal, but Billabong shares still faced a hammering.
"A lot of the disappointment would have been built in but there still would be people who would have been very hopeful for the takeover," he said.
However, he said the retailer could still change its fortunes and the recent appointments of chief executive Launa Inman and chairman elect Dr Ian Pollard were positive moves.
"They've certainly got a long way to go to get their debt down," he said.
"If they get some decent weather in Europe, as in cold winters and hot summers so they can sell snowboards and board shorts in the right seasons, and the US economy picks up, then there's light at the end of the tunnel, but it might take a while."
Reports that TPG was considering withdrawing its takeover offer circulated Thursday last week, causing the share price to tumble 22 per cent.
At the time Billabong said TPG had not withdrawn from the sales process but had concerns that the parties were working through.
This was TPG's second takeover bid for Billabong. Its first unsuccessful bid for the surfwear retailer was rejected by Billabong in February for being too low.
At $850 million, it was significantly higher than TPG's second offer which Billabong also said de-valued the company.
Billabong said on Friday that it would continue with its transformation strategy which included closing stores, reducing product lines and expanding its online operations.
"The board is pleased with the progress around implementation of the transformation strategy and structural organisational change being driven by CEO Launa Inman," chairman Ted Kunkel said in a statement.
"Acting in the best interests of shareholders has meant that we have remained focused on implementing the transformation strategy throughout the formal process."
It also reiterated its guidance for this financial year of earnings between $100 million and $110 million, up from $84 million in 2011/12.