Wednesday, October 10, 2012

Top retailer to take lead role at Billabong

BILLABONG International has appointed experienced retail executive Ian Pollard as its chairman-elect as it attempts a turnaround amid waning interest from private equity suitors.

But the surfwear retailer may still find itself short of board members after its shareholder meeting this month, with investor advocates recommending that at least two directors be dumped.

The Australian Shareholders Association has recommended Billabong founder Gordon Merchant and former employee Colette Paull not be re-elected to the board for their role in rejecting a $3.30-a-share offer from private equity group TPG.

Billabong shares dived last week after the company confirmed TPG is reconsidering its current $1.45-a-share offer.

A second private equity firm, Bain Capital, made a matching bid but withdrew its offer in late September while undergoing due diligence.

''In his position as majority shareholder he [Mr Merchant] effectively prevented the board of directors accepting an offer of $3.30 per share from TPG Capital in February 2012,'' said the ASA in a report on its website. ''Not to sell or refusal to negotiate cost both him and all shareholders very dearly. In his position as a director, he should have known the perilous financial position the company was in and acted accordingly. His failure to do so no longer gives him the right to continue as a director.''

Mr Merchant was not available for comment.

The ASA said Ms Paull acted co-jointly with Mr Merchant and deserved similar treatment.

The ASA said it also seriously considered whether executive director Paul Naude also be dumped.
''This is a borderline decision as we considered it would not be wise to sack him as a director along with the previous CEO, Derek O'Neill, as this would leave too big a gap in the top management of the company.''
Current Billabong chairman Ted Kunkel, who recently announced plans to step down, presided over a rapid debt-fuelled expansion before the global financial crisis hit. He was chairman when Billabong rejected the higher takeover offer from TPG in February worth $850 million.

Mr Pollard is a past chairman of Just Group, the owner of several youth-oriented fashion retail chains including Just Jeans, Dotti and JayJays. Just has since been taken over by Solomon Lew's Premier Investments.

''Ian will bring a strong mix of commercial and financial expertise to assist with the ongoing transformation of the Billabong business,'' Mr Kunkel said. Billabong has said it is pursuing a four-year overhaul to combat sliding sales and profits.

Mr Pollard will join the board as chairman-elect after the annual shareholders' meeting on October 24.
Mr Kunkel will remain as chairman pending the due diligence outcome and, in the event that Billabong remains a publicly listed company, will stay until a smooth board transition is assured.