Zumiez Inc. said it was ending its takeover pursuit of West 49 Inc., leaving the path open for Billabong International Ltd. to continue its deal to buy the Canadian action-sports retailer. Zumiez said it couldn't agree to the terms
of the due diligence with West 49.
Last week, Zumiez approached West 49, saying it was prepared to make an offer exceeding the C$1.30 per share Billabong offered when the two companies entered a definitive agreement to merge last month. The offer was subject to a satisfactory due diligence review.
West 49 said it has some reservations over due diligence for competitive reasons given that Zumiez recently unveiled intentions to move into the Canadian market.
In its own statement, West 49 said that following receipt of Zumiez's proposal and in accordance with the terms of the existing acquisition agreement between the company and Billabong International Limited, the special committee of the board of directors offered to allow Zumiez to review the same information that was made available to Billabong and in the same manner as it was made available to Billabong, subject to Zumiez entering into the form of confidentiality agreement required by the existing acquisition agreement with Billabong. However, Zumiez has advised the company that it is not prepared to proceed with the due diligence process on that basis at this time. Accordingly, the company's board of directors has concluded that there is no longer a reasonable expectation that Zumiez will make a proposal that is financially superior to the Billabong transaction.
The special committee and the board as a whole reiterated their continued support for the Billabong transaction and confirm their unanimous conclusion and recommendation that the company's security holders should vote in favor of the Billabong transaction, under which the company's common shares and preferred shares would be acquired at C$1.30 per share.
The agreement with Billabong remains in effect, and further details of the Billabong transaction are expected to be included in a proxy circular to be mailed to shareholders in due course.
Last week, Australian-based Billabong offered to buy West 49 for CN$1.30 per share, representing a 136% premium at the time. The total value of the all-cash deal was CN$99.0 million ($94.3 million). The move would lift Billabong's store count from 90 to approximately 230 doors in the North American region.
Based in Ontario, West 49 has 138 primarily mall-based stores in nine provinces across Canada under the five banners. These include West 49, with 81 locations; D-Tox, 19; Off The Wall, 16; and Amnesia/Arsenic, 17. It also operates five Billabong stores under license in Canada.