Ryan Enn Hughes
U.S. teen apparel retailer Zumiez Inc. said late on Tuesday it is no longer interested in buying Canada's West 49 Inc. , clearing the way for Australia's Billabong International Ltd. to wrap up its $83.2-million takeover offer.
West 49, whose shares sank more than 9 per cent Wednesday morning, confirmed in a separate release it would now favour Billabong's offer, after Zumiez backed away over disagreements on the terms of the due diligence process.
Zumiez had informed West 49 last week it was prepared to top Billabong's cash offer of $1.30 a share. However, the U.S. retailer would have had to do an expedited review, which seemed unlikely to be completed before the Billabong deal closed, said analyst Neil Linsdell of Versant Partners, who was not surprised Zumiez decided to give up on its offer.
"When it came out, it looked like it was more maybe opportunistic to see if they could get some information about the company or about the market ... I'm not sure about the ultimate motivation," said Mr. Linsdell.
West 49 and Zumiez are similar multibrand sportswear retailers and both sell Billabong products. Zumiez plans to open its first Canadian store in Vancouver next year.
Clothing retailer Billabong offered last month to buy West 49 for $1.30 a share in cash, aiming to expand its North American market for surfing and skateboarding gear.
Billabong's offer looks pretty rich, "but the value of West 49 is obviously in what Billabong can do with it," said Mr. Linsdell.
"Zumiez's decision to drop out could also have something to do with the pricing, it seems like the price was a little expensive," said MKM Partners analyst Linda Tsai.
"I think this brings them back to their original plan, which is to grow organically. It would probably be at a slower pace, but it's low risk and a less expensive way to enter the Canadian market," she said.
"The West 49 bid would have been an immediate entry into the market, but it's not without risks," Ms. Tsai said.
West 49 said its board supports the Billabong transaction and recommends shareholders accept the deal.