Industry Rumors

There has been much talk in the past year about the future of Billabong. We came to know that they were in financial trouble after canceling the Billabong Pro J-Bay last year. That may be the least of their worries after investors have been on a selling frenzy in the past five years. Since 2007, their stock (BBG.AX sold on the Australian Stock Market) went from $17 per share to $.96 this year, and is at $1.02 at the moment.

There are virtually three main options that Billabong has: 1) a miraculous recovery within the corporation (restructuring of the board, executives, etc.) 2) bankruptcy; I am not familiar with Australian regulations on bankruptcy, but in the US, companies can file for bankruptcy and eventually their companies will recover - Donald Trump has done this with many of his companies numerous times. 3) a buy out. Yes, you read that correctly; some other company could come in and purchase Billabong.

We have seen this before; not many people realize that some of today's leading surf companies are owned by a larger (and wealthier) parent company. Hurley is owned by Nike, Volcom is owned by PPR, a French-based company that owns major global fashion brands such as Gucci, Yves Saint Laurent and Alexander McQueen. This is a common occurrence, especially in a weakened global economy.

An acquisition of Billabong would also mean the acquisition of the companies that Billabong owns.  Unbeknownst to many, Billabong is the owner of some well known corporations in the surf and skating world such as Element, Von Zipper, Xcel, Honolua Surf Company, Kustom, Palmers Surf, Nixon Watches, Tigerlilly, Sector 9 Skateboards, DaKine and RVCA.  These are major clothing and hardgoods companies that would look appeasing to an interested buyer.

This may mean a better future for Billabong. Nike is now becoming a powerhouse in the surfing world by sponsoring major events and some of the worlds best WCT surfers (Kolohe, Julian Wilson, Carissa Moore, etc). Hurley is still Hurley and Volcom is still Volcom; I believe that from a financial standpoint, a buyout will be Billabongs best option. It will be sad to see Billabong, once the largest name in surfing, have to become an acquisition of a larger company. But stubbornness cannot overpower the reality of the situation. If Billabong does not act, they will go under. Many surfers are worried about the status of the Billabong Pro Tahiti and if it will still run. I do not see them canceling that event in such short notice, but only they know the true state of their company and if they have to then I am sure they will.

This is big news in the surf world and it will be interesting to see how this situation plays out in the near future. Will Nike or another company buy Billabong? Will they have a recovery and restructuring internally in the company? Or will they have to file for bankruptcy? We don't know yet, but we will have an answer within the year I believe and I will keep you up to date on this subject.

Leave thoughts and comments about this situation. I'm interested to hear.