Billabong announced today that it is buying Canadian action sports retailer West 49 in an all cash deal valued at approximately C$83.2 million, or C$1.30 per share, a 136 premium over the company’s closing prie of C$0.55 on Tuesday. The deal, which will help expand Billabong’s Canadian presence through West 49’s 138 primarily mall based shops, is expected to be completed in September.
The news comes as rumors of Billabong’s acquisition of RVCA have been dragging out and Zumiez’s recent announcement that it’s expanding into the Canadian market.
Billabong, which currently operates more than 300 stores globally, has grown through such high profile acquisitions as Sector 9, Dakine, and Quiet Flight sites the following benefits for the West 49 purchase:
• Increases the availability of Billabong's brands in the key action sports market of Canada
• Provides the ability to increase wholesale throughput of Billabong's existing brands via an expanded retail network – currently across West 49's portfolio Billabong has a brand share of approximately 15%
• Increases Billabong's participation in an important distribution channel including providing greater influence over the store environment and brand image presented to consumers
• Provides the opportunity to expand on West 49's current platform to enhance premium action sports retailing in the Canadian market
• Provides North American retail expertise and efficiencies for Billabong's expanded retail network
• Enhances retail presence providing Billabong with faster feedback on consumer trends and the ability to test product
• Provides increased branding opportunities, which in turn will drive demand
• Broadens Billabong's retail portfolio to better target key Canadian demographics via West 49's banners
“West 49 is a complementary business and promises to be an ideal Canadian distribution platform for Billabong to showcase its brands and extend its reach,” Billabong Chief Executive Derek O’Neill said in a statement.
“This is a proud day not only for myself as founder of the Company but for all of our employees who have contributed to the growth and success of the Company over the past 15 years,” said Sam Baio, President and Chief Executive Officer, West 49 Inc. “Becoming part of the global Billabong family will create new opportunities for our business and, just as importantly, new opportunities for our valued employees throughout the organization.”
Billabong says it will fund the deal with its existing debt facilities, and has entered into support agreements with major West 49 security holders that are in favor of the deal.
West 49, which has about 64 million common shares outstanding, said its preferred shareholders will receive accrued and unpaid dividends on their shares.