Australian surfwear retailer Billabong International Ltd. (BBG.AX,BLLAF.PK) said that it has decided to undertake a strategic review of its multi-brand ecommerce businesses SurfStitch.com in Australia and Europe, and Swell.com in North America.
Billabong has appointed international investment banking firm Guggenheim Securities to assist in this review. The appointed advisors will evaluate a range of options to maximise the value of these businesses, including consideration of conducting an international sale process.
Billabong CEO Neil Fiske said the strategic review of SurfStitch and Swell would consider a range of options as part of the Company's wider ecommerce strategy.
"As previously announced at our December AGM, our strategic priority is to focus on our direct to consumer mono-brand model across our retail and online operations. This review will assist us in evaluating options for the multi-brand SurfStitch and Swell ecommerce businesses," said Fiske.
Billabong owns North American-based Swell in its entirety and is a majority 51% shareholder in SurfStitch. The joint venture partners that own the remaining 49% interest in SurfStitch have appointed JP Morgan to represent their interests in the process.
Following constructive discussions with the joint venture partners as to Billabong's wider ecommerce strategy and their future vision for the SurfStitch business, it's been jointly agreed to explore future options.
The company also announced that it has entered into a new contract with Pat Tenore, the founder of RVCA, its global brand.
Based in Costa Mesa, California, RVCA was founded by Pat Tenore and has seen significant growth globally in recent years.
The financial aspects of the agreed contractual extension include an amendment tothe 2015 earn out arrangements which were negotiated as part of the originalacquisition in 2010, a performance related component for the period to 2018, and theissue of 1.2 million ten year options exercisable at 60 cents.
The 2014 earnings impact will be to expense approximately US$10 million in the secondhalf of fiscal 2014 as a significant item, the majority of which relates to the one time only amendment to the 2015 earn-out.
In addition, the company also confirmed that the previously announced sale of West 49has closed. The final proceeds of approximately C$3 million were below the previouslyannounced range due to seasonal end of year trading and other factors contributingto lower working capital on closing.
"I am pleased that the Company has completed another of the simplification initiatives we have laid out in our turnaround plan. We continue to have an ongoing relationship with the purchaser, YM Inc to ensure we continue to serve our consumers in theCanadian market," said Neil Fiske.
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