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OSIM increases buy-out offer price from $1.39 to $1.41

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And so the saga continues. On 8 April 2016, OSIM increased the buy-out offer price from $1.39 to $1.41. The revised offer price is basically on a cum-dividend basis and will be the final offer price.

To be frank, the revised price is nothing to shout about and is unlikely to sway those dissent shareholders who refused to accept Ron Sim’s offers. Whether maverick entrepreneur Ron Sim can successfully de-list OSIM remains to be seen but it would be interesting to analyse what exactly prompted this shocking corporate move of the year.

Bad times ahead?

One possible reason for Ron Sim to de-list OSIM might be because of a possible global economic downturn. After all, China is slowing down now and OSIM had previously banked on rich Chinese’s spending power. A look at its global network of outlets revealed that the number of outlets in North Asia has been reduced from 365 to 360. Overall, the company is also reducing its GNC and TWG Tea outlets.

As OSIM’s core business is still in selling luxury massage armchair, a global economic crisis will definitely impact its share price negatively. Drawing from the Great Financial Crisis (GFC) in 2008, its share price tumbled to a record low of $0.04. Perhaps Ron do not want to go through this painful chapter again, thus prompting him to privatize OSIM. But then again, given his resilient style, such a reason may not hold water. After all, Ron Sim is the man responsible for building OSIM from scratch into a global brand. Against this backdrop, a cyclical downturn in the market would not possibly strike fear in this seasoned businessman.

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Big bold plans for OSIM?

The other possible reason is that Ron Sim wants to have the cake all for himself because he has big bold plans to expand the company, which could lead to an explosive profit growth. Many investors had forgotten that from 2012 to 2014, OSIM has witnessed an incredible 21 quarters of profit growth. An amazing feat for a local enterprise. The winning run was punctured by the China’s downturn in recent years and subsequently, OSIM’s share price started to fall.

A falling share price may not be a bad news, at least for Ron who had been quietly accumulating OSIM’s shares. Thus, the current price represents a perfect opportunity for him to buy the company on the cheap. The company is cash rich, with a net current asset of $378 million. This is a huge amount of cash pile and there are definitely not many listed home-grown companies with such strong financial health out there. If the buy-out is successful, Ron Sim might have some interesting plans for OSIM.

A secret buyer behind the scene?

The last possible reason that I can think of for OSIM’s privatization might be that Ron Sim is preparing to sell the company to a venture capitalist after successfully de-listing the company. At the global front, the company represents a very attractive acquisition target because it holds three well-known brands, namely OSIM, GNC and TWG Tea. It takes many years to build these successful brands, and it is even rarer to find three brands under one management. Henceforth, if Ron Sim is to package and sell these three brands, I am sure it could fetch billion of dollars for him.

I am not vested in this stock and I do not work in the financial sector. But nevertheless, OSIM is a well-known brand in Singapore. As a Singaporean, I hate to see this home-grown company disappears from SGX. But then again, the stock market is no place for sentiments or emotions. Investors holding OSIM shares need to think carefully whether to accept Ron’s final offer. Enjoy the ride.

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Updated: August 12, 2016 — 3:32 pm

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