Billabong International Limited announced that it has entered into an agreement to acquire Nixon Inc, a leader in the premium watch and accessories boardsports market.
Nixon is a California-based, closely-held corporation, founded by Andy Laats and Chad DiNenna who together hold an effective 50% ownership interest in the company. Nixon is expected to comprise 5% to 6% of Billabong's group sales for the 2006-07 financial year.

Billabong International Limited chief executive Derek O’Neill said Nixon is a key watch and accessories brand in the boardsports channel, particularly in the North American market.

“Since its inception in 1997 Nixon has been a very focused watch brand with great
product, great people and tight distribution through the core surf, skate and snow
channels,” Mr O’Neill said.

“Nixon founders Andy Laats and Chad DiNenna have demonstrated their ability to
establish and grow an authentic brand and the business is an excellent fit within the
Billabong group.”

Mr DiNenna said: “The Nixon brand and company are as strong as they have ever
been and now is the right time to join a strong and experienced partner to help us
reach our full potential.”

Mr Laats said Billabong was of great appeal to Nixon.
“The Billabong group has a lot to offer; the character of their leadership, our shared
vision of Nixon’s future and their expertise in the specialty markets make them the
perfect choice,” Mr Laats said.

Consistent with Billabong’s general philosophy, both founders will continue with the
business. Mr Laats will remain as President and Mr DiNenna will continue to direct
global marketing efforts.

The purchase price comprises an initial payment estimated at A$73 million and a conditional maximum deferred amount calculated as the greater of an estimated A$24 million or 2.25 times 2010 EBITDA. The payment of this maximum deferred amount to all Nixon shareholders is conditional upon both founders fulfilling their respective five-year
employment contracts. If both founders fulfill less than the five-year term of their respective employment contracts, then the deferred amount is reduced in accordance with a sliding scale. The purchase will be fully debt funded by Billabong.

Billabong’s Mr O’Neill said the purchase was expected to be slightly EPS negative in the year ending June 30, 2006, due to business seasonality, but EPS positive in the
2006-07 financial year and beyond. The acquisition is forecast to deliver a pre-tax return on capital employed in excess of Billabong’s pre-tax cost of capital in 2006-07.

“We see the brand’s inclusion into our group as a great opportunity as it gives us a firm foothold in a growth category in which we were under-represented,” he said.