UPDATE 2.40pm: Takeover talks between Billabong and US private equity firm TPG are expected to take at least a month, as the troubled surfwear retailer tries to push for a higher offer.
Billabong on Friday said it would allow TPG to run the slide rule over its books but said the $1.45-a-share offer on the table did not reflect how much the retailer was worth.
Billabong's board and advisers have reviewed the bid and agreed to allow TPG to carry out non-exclusive due diligence in order to reduce the conditions attached to the offer and improve TPG's understanding and valuation of the retailer.
It is believed Billabong will use the due diligence process, which is expected to start in early August and run well into September, to negotiate a higher offer.
“There is no guarantee that, following the due diligence process, a transaction will be agreed or that the board will recommend an offer at the current proposed offer price,” Billabong said in a statement.
“In fact, the board of Billabong does not believe that the proposal reflects the fundamental value of Billabong in the context of a change of control transaction.”
IG Markets analyst Stan Shamu said he would not be surprised if Billabong was trying to get TPG to raise its offer.
“Obviously they're offering $1.45 and they're trading around $1.35 which is a small discount,” he said.
“They were looking at a much higher bid only a few months ago so they probably would want a bit higher bid but it's still subject to conditions.
“Maybe someone will come into the picture but for now it seems that they will try to get a higher offer.”
TPG tabled its fresh $695 million takeover bid for Billabong, its second this year, on Monday after the Australian stock market had closed.
The latest offer is nearly 20 per cent lower than TPG's unsuccessful $850 million bid for Billabong made in February.
At the time, Billabong said the offer undervalued the company.
However, in June it tapped shareholders for $225 million to reduce its $325 million debt pile.
Billabong is planning to unveil a three-year transformation strategy focused on reinvesting and reinvigorating its brands when it reports its full year earnings results, scheduled for August 27.Its shares closed steady at $1.35.