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UPDATE 1-TPG walks away from A$694 mln Billabong bid

* Billabong shares seen under pressure

* Deutsche Bank gives Billabong fundamental valuation of 85 cents a share

(Adds comment, share opening)

SYDNEY, Oct 12 (Reuters) - Private equity firm TPG has withdrawn its A$694 million ($713 million) takeover bid for Australian surfwear retailer Billabong International Ltd , a week after raising concerns while inspecting the books.

The withdrawal of the bid is likely to put further pressure Billabong's shares as the firm struggles with a weakening retail outlook in Australia. The shares are due to start trading at 0000 GMT on Friday, an hour after the market open.

Billabong stock fell as much as a quarter last week to its lowest in three months after TPG first raised its concerns. The stock closed on Thursday at A$1.005 a share and has been trading well below TPG's offer price of $1.45 since late August, indicating investor nervousness.

"When two bidders have walked away after seeing the books, the first question in investor minds is: what is hiding in the books? The TPG withdrawal is a big negative for the stock," Stan Shamu, market strategist at IG Markets said.

Buyout firm Bain, which came in with a rival bid, withdrew last month.

Deutsche Bank said in a note to clients last week that TPG quitting the deal would send the stock lower. It gives the stock a valuation of 85 cents a share.

TPG's withdrawal means shareholders will have to rely the company's recently outlined four-year plan to simplify the business in the hope of reviving falling sales and restoring profitability, analysts said.

Billabong has already conceded investors would have to wait two years to see the biggest benefits of the new strategy.

"Billabong continues to implement its transformation strategy detailed on Monday, 27 August 2012. This strategy, under CEO Launa Inman, provides a clear pathway to unlocking the inherent value within the company," it said in a statement.

Billabong, which in August reported its first annual loss since listing over a decade ago, snubbed a more generous TPG offer of A$3.30 a share in February.

It 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 = 0.9735 Australian dollars)

(Reporting by Narayanan Somasundaram; Editing by Richard Pullin and John Mair)

((narayanan.somasundaram@thomsonreuters.com)(+61 2 93731815)(Reuters Messaging: narayanan.somasundaram.reuters.com@reuters.net))

Keywords: BILLABONG TPG/