Quiksilver’s Rossignol Sale Price Tumbles

mike lewis

• October 31 2008
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Quiksilver (ZQK) announced today that the binding offer it received on August 27th to purchase Rossignol from Chartreuse & Mont Blanc, which is headed by Rossignol’s former CEO Bruno Cercley’s, is moving ahead as planned and should be finalized in early November.

One major caveat noted in the press release is that the selling price has been reduced from the initially agreed upon cash payment to Quiksilver upon closing of €75 million to €30 million as well as a reduction of the seller’s note from €25 million to €10 million. Despite the 60 percent decline in the overall purchase price, Quiksilver stock, which has been sagging in recent days, is currently trading at $2.81, up nearly 12 percent on the day following this announcement.

Here’s the press release:

Huntington Beach, California - Quiksilver, Inc. (NYSE:ZQK) today confirmed that the previously announced sale of the “Rossignol Group” is expected to close in early November. The Company indicated that key conditions which were required to close the transaction have largely been met after the buyer secured committed financing and the parties agreed to recast the terms of the sale due to the recent challenges in the global credit markets. The revised transaction reduces the cash payment to Quiksilver upon closing from €75 million to €30 million and reduces the seller’s note from €25 million to €10 million. The transaction also allows Quiksilver to continue to distribute Rossignol apparel through the 2008/2009 winter season, enabling the Company to realize an additional €5 to €10 million benefit from the collection of in-season receivables. The parties may also extend the Rossignol apparel license and distribution arrangement upon mutual agreement. Together, these revisions to the transaction will cause a corresponding increase to the loss that Quiksilver expects to recognize upon the sale of Rossignol.

With committed financing in place, the completion of the sale transaction is only subject to final workers council advice and other customary closing conditions. Rossignol’s workers council has already reviewed the originally proposed transaction and provided its requisite advice consistent with French law. Quiksilver expects that the workers council will complete its process in a timely manner, thus allowing for the close of the transaction in early November.

Robert B. McKnight, Jr., Chairman of the Board, Chief Executive Officer and President of Quiksilver, Inc., commented, “In this time of unprecedented challenge in the global credit markets, price concessions were required to achieve a final sale of Rossignol. We remain convinced that the timely close of this transaction is in the best interest of Quiksilver’s stakeholders and we look forward to completing the sale in early November. I’m delighted that we can now fully concentrate our efforts on our core apparel and footwear brands Quiksilver, Roxy and DC.”

The company noted that for accounting purposes it will perform its regular annual assessment of the value of its intangible assets as of October 31, 2008 and that current market conditions and valuation metrics could cause an impairment in goodwill or other long-term intangible assets. Any resulting impairment charge would be recorded as a non-cash expense in Quiksilver’s financial statements for the quarter and for the fiscal year ending October 31, 2008 and would not affect its operations, cash flows or covenants associated with the Company’s debt.

Quiksilver is scheduled to report financial results for its fourth quarter and fiscal year ending October 31, 2008 on December 18, 2008. Based on information currently available, the Company also disclosed that it expects to achieve the consensus estimate of analysts tracked by Thomson First Call for income from continuing operations of $0.87 per share for fiscal 2008, excluding potential charges such as those mentioned above.

About Quiksilver

Quiksilver, Inc. (NYSE:ZQK) is the world’s leading outdoor sports lifestyle company, which designs, produces and distributes a diversified mix of branded apparel, footwear, accessories and related products. The Company’s apparel and footwear brands represent a casual lifestyle for young-minded people that connect with its boardriding culture and heritage.

The reputation of Quiksilver’s brands is based on different outdoor sports. The Company’s Quiksilver, Roxy, DC and Hawk brands are synonymous with the heritage and culture of surfing, skateboarding and snowboarding, and its beach and water oriented swimwear brands include Raisins, Radio Fiji and Leilani.

The Company’s products are sold in over 90 countries in a wide range of distribution, including surf shops, skate shops, snow shops, its proprietary Boardriders Club shops and other companyowned retail stores, other specialty stores and select department stores. Quiksilver’s corporate and Americas’ headquarters are in Huntington Beach, California, while its European headquarters are in St. Jean de Luz, France, and its Asia/Pacific headquarters are in Torquay, Australia.