Youth-oriented clothing and sporting goods retailer West 49 Inc. has agreed to be taken over by Australia’s Billabong International Ltd. in a deal worth at least $83 million.
The Burlington, Ont.-based retailer said today that under the transaction Billabong will acquire the company for $1.30 per share. The chairman of a special committee formed by West 49 said the offer marks a significant premium on the closing price of 55 cents per share on Tuesday.
Billabong is an Australian based skate and surf apparel retailer that has some locations in Canada, which West 49 had operated.
“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,” West 49 president and CEO Sam Baio said in a release before stock markets opened Wednesday.
“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 has grown rapidly in recent years through acquisitions and now operates more than 300 stores across North America, South America, Europe, Asia and Australia. The West 49 transaction will add 138 mall-based stores and boost the Australian company’s bottom line in 2011.
“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 CEO Derek O’Neill said in a statement from Australia.
The Australian company said it plans to keep key West 49 management, including Baio, who will continue to lead the business.
West 49 said a combination of certain “significant” shareholders and the board of directors, who represent about 56% of outstanding shares, have entered into a lockup agreement in favour of the Billabong transaction.
“This transaction delivers a significant premium and an excellent liquidity opportunity to our shareholders that is unanimously supported by the Company’s board of directors,” said committee chairman Lucio Di Clemente.
“Billabong will strengthen the company’s future growth prospects and provide new business opportunities to the benefit of both our customers and our employees.”
West 49 operates in nine provinces, under the banners West 49, Billabong, Off The Wall, Amnesia/Arsenic and D-Tox.
Like many retailers, West 49 was squeezed by the 2008-2009 recession and the impact of an uncertain retail economy.
Analysts note that the industry faces even more potential trouble ahead as worries mount that consumers may retrench further in the wake of the new Harmonized Sales Tax that goes into effect Thursday in British Columbia and Ontario.
