For Ron Sim, a listing has lost its draw

RON Sim, a vocal critic of some of the Singapore Exchange's rules and practices, will finally take his company OSIM out of the local bourse, 16 years after it listed.

With that, the SGX would lose one of its best known stories, a rags-to-riches tale of a Chinatown salesman who claimed his place among Singapore's wealthiest.

On Monday, Mr Sim, OSIM's chairman and chief executive officer, announced an unconditional cash offer worth over S$300 million for the company's shares he doesn't already own in order to take Asia's biggest maker of massage chairs private. The businessman, who has direct and deemed interests of 69.25 per cent in OSIM, offered to buy the shares at S$1.32 apiece through his investment vehicle, Vision Three Pte Ltd. OSIM will be eventually delisted and privatised. Apart from massage chairs, the company distributes vitamins and health supplements under the GNC and RichLife store chain, and also owns TWG Tea.

The news surely caught the market's attention, but it's certainly not a complete surprise.

Market and business conditions portended such a move, and in the background, there's the sense that Mr Sim is chafing at the increasing burden of being a listed entity.

The privatisation offer comes amid an increasingly challenging environment for OSIM. In January, OSIM reported a net profit of just S$9 million for its fourth quarter ended Dec 31, 2015, down 66 per cent from S$27 million a year ago. Revenue fell 5 per cent to S$169 million from S$178 million a year ago.

For the whole of 2015, revenue fell 10 per cent year-on-year to S$620 million, while net profit halved to S$51 million.

China, once the brightest growth driver, is now in the throes of a painful economic slowdown. At home, the retail market in Singapore remains weak. TWG is embroiled in a legal spat, while the nutrition business is being rationalised. Indeed, the latest results included a one-off S$5.6 million loss from the closing down of underperforming nutrition subsidiary ONI Australia, and legal fees of S$3.4 million related to TWG.

Apart from OSIM, Mr Sim is also an investor in his private capacity in other businesses. He was an investor in Jumbo Seafood's recent listing, partnered Perennial Real Estate Holdings' Pua Seck Guan and Pontiac Land Group's Kwee Liong Seen in the iconic Capitol Theatre project, and is a major shareholder in Perennial Real Estate Holdings.

Taking OSIM out of the market's glare would allow Mr Sim more space and flexibility to deal with the uncertainties, steer the company through China's growth normalisation - he has never stopped believing in China's potential - as well as undertake any corporate restructuring necessary to put OSIM on the next phase of growth and rationalise all his business holdings. He hinted as much, when he said at the latest results announcement: "Obviously we do not know this quarter or next quarter how bad the market will be. I care less about what the market is. I care about what I should create."

Succession may also be something he wants to turn his attention to - while he has a loyal management team, he is still very much OSIM - and this delicate process is sometimes best done without being subject to intense market scrutiny.

That the market didn't have the patience, or wouldn't wait out what he's trying to create, has always been a sore point for Mr Sim. The dark days of the Brookstone acquisition appear to have left a deep impression. In 2005, OSIM led a consortium that included a unit of Temasek Holdings to acquire Brookstone Inc in the US, borrowing S$100 million to acquire for itself a 55 per cent stake.

Despite the US specialty retailer's propensity for making losses during the first three quarters of the year, Mr Sim was confident of turning the business around to whole-year profitability. What happened next saw OSIM's own profitability gyrate in tandem with Brookstone's quarterly volatility, and the market (too much fixated with short-term results, he felt) punished OSIM shares severely. In the end, OSIM made a S$77.31 million write-off on its troubled investment in Brookstone.

To him, the ever-expanding requirements heaped upon listed companies threaten to distract them, especially smaller firms, from running, growing or sorting out their business. Indeed, quarterly reporting, imposed on listed companies by the SGX since 2003, especially drew Mr Sim's ire. "It takes away too much of the CEO's and CFO's time and causes them to be short-termist, focused on the wrong things. I'd say that quarterly reporting could undermine the long-term performance of Singapore companies," he said in a 2014 BT survey on the issue (for the record, the SGX is now reviewing quarterly reporting).

And so it has come down to this for the man who put his own name into the brand - going private for OSIM now outweighs whatever benefits staying listed brings.

The Ron Sim story will continue even after OSIM quits SGX. But for the Singapore bourse, OSIM joins a list of household names that have left the exchange. Put against the current dearth of notable new listings, it's surely something to reflect on.

READ MORE: