Billabong makes timely acquisition

SYDNEY - Australian surfwear company Billabong International expanded in the market for trendy watches yesterday with a deal to buy California-based Nixon for at least A$97 million ($105.5 million).

Billabong said Nixon was a youth-inspired brand distributed in about 30 countries and targeted at the surf, skate and snow board sports markets.

It estimated Nixon, which is strong in North American board-sport watches, would contribute 5-6 per cent of sales in the 2006-07 fiscal year.

"It gives us a firm foothold in a growth category in which we were under-represented," Billabong chief executive Derek O'Neill said.

O'Neill said the company was not looking to further expand its range of categories, which also includes Von Zipper eyewear and Element shoes.

"I think there are probably less categories available now," he said. "I am not going to rule out any others, but we are not actively pursuing any other categories at this stage."

The company last month bought into airport-based surfwear retailer "beachculture" as it continues to expand in retailing.

"I don't think we have completely finished on the retail front globally, but whether that is by acquisition or just by extra store openings in areas devoid of suitable retailers, that is really unknown at this stage," O'Neill said. "At the moment I think we are pretty fine getting these ones [acquisitions] bedded down."

Billabong said the price would include an initial payment estimated at A$73 million and a conditional maximum deferred amount to be the greater of about A$24 million or 2.25 times 2010 earnings before interest, tax, depreciation and amortisation.

The acquisition was forecast to detract slightly from earnings per share in the year to June 30, 2006, but enhance eps in the following year.

Nixon's founders, Andy Laats and Chad DiNenna, hold an effective 50 per cent interest in the company.

The acquisition is conditional on approval by Nixon's shareholders and regulatory clearance, with those issues expected to be decided by the end of January.

Billabong posted a 44.1 per cent rise in net profit to A$125.4 million last year, driven by a strong retail sector in the first half.

- REUTERS, AAP