Will Billabong go for a bargain?

We can now officially reveal the price that Billabong shareholders have paid for the stubbornness of company founder Gordon Merchant.

Merchant, you will remember, aggressively rejected a $3.30 a share offer for the beleaguered company in February, declaring he wouldn’t even listen to a bid below $4.

TPG, which made that $3.30 offer, has watched Billabong’s shares plunge below $1 after yet another profit warning and dilutive $225 million capital raising and has now lobbed a cheeky $1.45 a share offer, priced well above yesterday’s share price of $1.01.

TPG’s first offer valued Billabong at $850 million. Its new offer values the company at $695 million.

Shareholders, I don’t expect Gordon Merchant to refund the $155 million he’s cost you, but at least he has admitted he feels “bad” about knocking back that first takeover and he’s open to a deal.

Whether the man who thought Billabong was worth $4 a share just five months ago will be really enthusiastic about a $1.45 a share offer is questionable.

However, Merchant, who owns 15.6% of the company, may just have to swallow his pride.

Shareholders are rightly furious with the stance he took in February and the continued deterioration in Billabong’s trading performance.

According to a report in The Australian Financial Review, major institutional shareholders Colonial First State and Perennial Value, are supportive of the TPG bid.

The shareholders and the board may well try and squeeze a bit more out of TPG, although the private equity firm will no doubt point out the price offered is at a big premium to where the shares have been trading.

TPG might also argue that the performance of Billabong has even further gone downhill since its original offer in February, and there is a distinct lack of other bidders out there. TPG could well say that if the board wants a relatively easy way out of the mess it has created, taking the $1.45 a share might be it.

However, perhaps the guys at TPG will feel generous – after all, it could be argued that they are about to grab a real bargain.

Yes, Billabong’s trading performance has taken a turn for the worse since February, but TPG would have seen this coming. And, yes, the share price has tanked due to the capital raising, but the good side of that is that Billabong’s debt level is now down to $100 million.

So perhaps TPG does have a bit more room to increase its cheeky offer. Perhaps it can save a little bit of Gordon Merchant’s $155 million worth of blushes.

But the private equity firm is in a great position to play hard ball with a board that has royally stuffed this up.

James Thomson is a former editor of BRW’s Rich 200 and the publisher of SmartCompany and LeadingCompany.