Billabong has alienated many investors in a tumultuous year that has seen it first reject a A$3.30 bid by TPG Capital TPG.UL in February as too low, and then have subsequent offers of A$1.45 from TPG and Bain Capital withdrawn after due diligence.

Billabong said on Wednesday a consortium led by board director Paul Naude and New York-based private equity firm Sycamore Partners had offered A$1.10 a share. But the announcement coincided with the firm's third profit warning this year and appeared to break a confidentiality agreement, sparking speculation the group may backpeddle on its bid.

In a later statement, Billabong said the consortium's bid was "unchanged" apart from the removal of the condition of confidentiality.

By that time, the shares of the struggling surfwear company had slumped. The stock recovered slightly to close 13.3 percent lower at A$0.85, in its biggest one-day percentage fall since TPG dropped its second bid in October.

"Trust has been completely destroyed between Billabong and the market. It was only a couple of months ago the business was talking up its (earnings) prospects so the shift in tone is quite significant and the market sees a lot of confusion there," said Peter Esho, analyst at City Index.

Billabong, which has sold off key assets and replaced its chief executive, said annual earnings could be 15 percent lower than previously forecast.

SALES SLIDE

Naude stood aside from his role as president of Billabong's Americas operations in mid-November for six weeks to look at putting together a buyout proposal.

Billabong, which is being advised by Goldman Sachs (GS.N), said the consortium involves Naude as a cornerstone equity investor and Bank of America Merrill Lynch (BAC.N) as lead debt financier.

Local media reported that Perennial Value Management, which holds around 9 percent of Billabong, was willing to accept the latest offer. Perennial declined to talk to Reuters.

Due diligence is expected to take four to six weeks.

"It's been an amazing fall from grace," said Jason Beddow, managing director of Argo Investments, which manages A$3.5 billion and has a small stake in Billabong.

"The live bid means (Naude) gets due dilligence and if the bid was based on current performance maybe A$1.10 becomes a buck."

Nomura Securities said in a report that proposal could be either pulled or amended and "the risk/reward balance looks uncompelling given the uncertainty."

New chief executive Launa Inman has outlined a four-year turnaround strategy to simplify the business and close stores but has been unable to arrest a downturn in sales.

Citing weakness in European, Canadian and Brazilian markets, Billabong cut its forecast for full-year underlying earnings to a range of A$85-A$92 million before interest, tax, depreciation and amortization, excluding one-off items of A$29 million.

That was down from an August forecast of A$100 million to A$110 million.

($1 = 0.9487 Australian dollars)

(Additional reporting by Victoria Thieberger; Editing by John Mair, Edwina Gibbs and Ryan Woo)

• A Permanent Economic Emergency