By Gavin Lower and Gillian Tan 
 

MELBOURNE--Australian surfwear retailer Billabong International Ltd. (BBG.AU), at the center of a takeover tussle between two U.S. consortia, said Thursday it is investigating the reasons for a fall of as much as 22% in its share price.

Billabong requested that trading in its shares be halted until Monday at the latest while the investigation takes place. Its shares traded at 69.5 Australian cents, down 14%, when the halt was granted, having touched a low of 63 Australian cents.

The former head of Billabong's Americas division, Paul Naude, has teamed up with private equity firm Sycamore Partners Management to make a 526.8 million Australian dollar (US$542.6 million) offer for the company. VF Corp. (VFC), the owner of Timberland and The North Face brands, joined up with Altamont Capital Partners to match the A$1.10-a-share offer from Mr. Naude's group.

Two people familiar with the deal talks involving two U.S. groups said neither party has indicated that they are walking away ahead of a March 28 deadline to make final bids.

Credit Suisse analyst Grant Saligari on Wednesday published a note reiterating a A$1.10 a share price target on the stock, reflecting "the likelihood of a takeover proceeding from one or more of two private equity proposals."

Billabong had a market value of A$3.8 billion as recently as 2007, but the company has recently been battling to reverse an earnings decline triggered by the global slowdown, a strong Australian dollar that has diluted overseas income, and the dwindling appeal of its core brands among younger people. Sales in the Americas and Europe have fallen sharply as cautious consumers rein in spending or switch to other brands, leading to a build up of surplus clothing stock.

Write to Gavin Lower at gavin.lower@wsj.com and gillian.tan@wsj.com

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