Gordon Merchant, the founder of the Billabong label has fired a shot across the bows of private equity group TPG, who made an offer of $ 3 a share for the company.

Jordy Smith winner of the 2011 Billabong Pro in Jeffreys Bay.

In a letter from his lawyer, Minter Ellison, Merchant described the offer as “vastly undervaluing the value of Billabong and its shares”.

Merchant went on to say that even $ 4 a share would be unacceptable to him and would be rejected.

TPG made a counter offer of $ 3.30, which was rejected by the Billabong board and all talks between the two entities have now ceased.

Billabong has controversially downgraded the Billabong Pro surf contest in Jeffreys Bay, siting economic constraints for the decision.

A proposed downgraded event will be held instead but this event will not attract the top surfers in the world like 11 x world champion Kelly Slater.

The downgrade has been likened to taking Wimbledon off the international tennis circuit.

Supertubes has long been regarded as one of the finest waves in the world and it would be a travesty to have a World Championship tour without Jeffreys Bay being one of the venues.

South African Jordy Smith has won the previous two Billabong Pro events and would certainly have been gunning for his hat trick in 2012.

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