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IN a puzzling turn of events, share trading in lifestyle products group OSIM International was halted at 4.48pm on Tuesday, after markets had just begun to digest a sweetened takeover offer by founder Ron Sim.
No explanation was given by press time, except that an announcement will be made. When contacted, Mr Sim declined to comment.
He had, in the morning before markets opened, announced a revised and final offer price of S$1.39 a share. The offer was inclusive of a two-cent final dividend, and was seven Singapore cents higher than his original bid. Shares in OSIM, which were trading without the final dividend, then rose to as high as S$1.40 before coming down to the ex-dividend offer price of S$1.37 in the afternoon. Almost 25 million shares were traded on Tuesday, with two million shares traded at S$1.37 and below.
Some analysts said that the revised offer might still disappoint investors who had bought more expensive stakes in recent years.
"The higher price obviously is more attractive, but it may still not be enough to convince most of the minority shareholders," said James Koh, RHB Bank's head of regional consumer research, in e-mailed comments to The Business Times.
"However, it is a final offer and we do not expect any further upward revision. The share price trading reflected this," he said.
Mr Sim had announced his privatisation bid on March 7, citing a desire to make quicker corporate decisions. OSIM sells massage chairs, nutritional supplements and luxury tea. Since end-2014, the company had been hit by weaker consumer sentiment.
Mr Sim's previous offer price of S$1.32 a share had represented a premium of 31.8 per cent and 33.5 per cent to the volume-weighted average price (VWAP) for the corresponding one-month and three-month periods up to and including Feb 29, 2016.
Even though OSIM shares have traded as low as S$0.775 in January's market volatility, shareholders were reluctant to bite.
Just 0.11 per cent of the share capital of OSIM was tendered as acceptances as at Monday. The same day, its shares had traded at S$1.355 before a trading halt was called at 11am so the revised offer announcement could be made. OSIM also announced that its first quarter results would be out on April 19.
With the latest offer, which is final, Mr Sim will fork out an extra S$16 million, based on the 228 million shares that he and his family did not own prior to making the offer.
The final offer prices OSIM at around S$1 billion, and just over 15 times adjusted 2015 net profit of S$67 million after taking out the effects of one-off legal and operational costs that year.
However, analysts have pointed out that a substantial number of shareholders have acquired their stakes at higher prices and might not be satisfied. DBS analyst Alfie Yeo said in a March 18 note that the second to seventh-largest shareholders collectively own 13.79 per cent of OSIM and had entered their initial positions from 2012 to mid-2014, when the VWAP was S$1.88.
"If all of them collectively decline the offer, there will be lower possibility of privatisation success," he said.
Mr Yeo suggested a higher offer price of S$1.51, a 25 per cent premium over the six-month unaffected VWAP of S$1.21. Yet, he also noted downside risks coming from a deterioration in business conditions after the offer lapses.
Based on Bloomberg data, the major shareholders referred to in Mr Yeo's report are funds linked to Capital Group, Morgan Stanley, Macquarie, Franklin Resources, Havenport Asset Management, and William Blair & Company.
Morgan Stanley-linked funds, for example, held 2.76 per cent as at end-February, with an estimated holding period of two years and an average cost price per share of S$2.54.
The offer was already unconditional from the start. This means shareholders who tender their acceptances will receive their payments within a week or two, and those who have accepted the earlier offer price will be paid the appropriate amount at the higher price. A deadline to watch is April 25, the closing date of the offer.
When asked about the legal technicalities of takeovers looking ahead, Gibson Dunn partner Robson Lee said that Mr Sim needs 90 per cent of the 30.75 per cent of the shares he did not own pre-offer to compulsorily "squeeze out" minority shareholders who have not accepted the offer by the closing date.
He said that takeover rules allow an unconditional offer to be extended beyond 60 days from the posting date of the offer document, with the Securities Industry Council's permission.
Trading halts after a revised offer price usually come with a competitive bid, he said, but this situation was impossible due to the 70-plus per cent owned by Mr Sim and family.
On what other reasons might have caused the halt, he said: "Let us wait for the announcement."
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