* AFR says TPG considering formally withdrawing from Billabong sale
* Rival Rip Curl has said received approaches
* Billabong shares drop as much as 23 pct, then halted pending announcement
* TPG declines to comment
(Adds analyst, source comment; shares halted)
By Miranda Maxwell
MELBOURNE, Oct 4 (Reuters) - Australia's Billabong International Ltd lost almost a quarter of its market value after a report said the last remaining bidder, private equity firm TPG Capital Management LP , might follow former suitors and ditch its takeover offer for the surfwear retailer.
Texas-based TPG was mulling formally withdrawing its $700 million takeover bid after weeks of due diligence, the Australian Financial Review said, citing unidentified sources.
If TPG did withdraw, and no other offer emerged, shareholders would be at the mercy of new Chief Executive Launa Inman's recently outlined four-year plan to simplify the business, revive falling sales and restore profitability, analysts said.
"The likelihood of TPG not proceeding looks high based on today's price action. The market tends to get it right," said Peter Esho, analyst at City Index.
"It goes from being a corporate play to a very different play, which is banking on management's ability to deliver and restore trust," he said.
Billabong has already conceded investors would have to wait two years for the biggest benefits of the new strategy to flow through.
A Reuters source with knowledge of the transaction, who declined to be named, said on Thursday a decision to pull the offer had not been made yet by TPG.
Only two weeks ago Billabong said another unnamed suitor had dropped out of bidding for the firm, leaving TPG as the sole interested party. Sources told Reuters the second bidder had been Bain Capital LLC.
While the company expanded aggressively, sales of its Billabong products, as well as brands Von Zipper and Element, weakened.
Sales have declined in Europe, Canada and Australia, and the brand has lost much of its cachet with young shoppers. Its competitors include Quiksilver Inc , Pacific Sunwear of California Inc and Zumiez Inc .
RIVAL GETS APPROACHES
"It leaves them probably at around A$1 a share until they can prove new management's ability to meet the targets that are out there and address the issues as to why two private equity firms did not proceed," said Esho.
Rival Australian surfwear company Rip Curl said last month it had received unsolicited approaches from several international companies wanting to invest in the privately held firm, in a deal that could fetch up to A$480 million.
TPG declined to comment on the report.
Shares in Billabong fell to A$1.015, their lowest in more than three months, and last traded down 18.3 percent at A$1.075. The company has requested a halt to trading in its shares pending an announcement on the AFR report.
TPG's indicative, non-binding offer, made before it began due diligence in recent weeks, was at A$1.45 a share.
Billabong, which in August reported its first annual loss since listing over a decade ago as sales fell 7.9 percent, snubbed a more generous TPG offer of A$3.30 a share in February.
It then dumped its chief executive in May after several profit downgrades, and appointed Inman who previously headed discount chain Target, owned by Wesfarmers .
Since the first approach from TPG, which has a 12.5 percent stake in the company, Billabong has sold half of its watch brand Nixon and raised A$225 million in equity to reduce debt.
($1 = 0.9553 Australian dollars)
(Additional reporting by Narayanan Somasundaram; Editing by Daniel Magnowski and Muralikumar Anantharaman)
Keywords: BILLABONG TPG/SHARES