RETAIL | Marianne Estioco, Singapore

Is OSIM’s privatisation bid doomed to fail?

The offer price is too low, analysts say.

If business tycoon Ron Sim wants his privatisation bid for OSIM to succeed, then he may have to hike his offer in order to woo long-term shareholders. Analysts note that many of OSIM’s minority shareholders snapped up the units at much steeper prices, and thus might be unwilling to bite Sim’s offer of $1.32 per share.

DBS analysts Alfie Yeo and Andy Sim said that OSIM’s 2nd to 7th largest shareholders collectively own 13.79% of OSIM, and bought their shares at an average price of $1.88 per unit.

“If all of them collectively decline the offer, there will be lower possibility of privatisation success. The offeror would then have to increase his offer price if he wants the privatisation to be successful,” they noted.

Further, trading sessions following the offer announcement on March 7 saw the company’s share price shoot past the offer price, indicating that the market believes the offer price is too low.

Maybank Kim Eng analyst Gregory Yap noted that the offer has a low chance of success unless Sim hikes his offer. He noted that the offer price is a far cry from OSIM's all-time high of $2.94 per share, which means that there are likely a lot of investors with much higher holding costs.

"From this perspective alone, we think Mr Sim will not get a lot of acceptances. Institutional shareholders own only 10.3% and is not enough to swing the 27.7% in acceptances he needs to compulsorily acquire,” Yap noted.

Yap warned that shareholders run the risk of being stuck in a suspended stock if Sim manages to acquire 90% of Osim's issued shares. In order to delist entirely, Sim would have to get 90% of minority shareholdings, making up 97% of total shares issued.

"This should be an expensive transaction for Mr Sim, hence it will be in his interest to make sure he gets enough to delist. Anything less will just be a waste of money,” Yap said.

Other analysts note that the offer is fair given current muted market conditions, particularly as the offer price represents a 31.8% and 33.5% premium to the stock’s volume weighted average price for the corresponding one-month and three-month periods respectively. 

“We believe in the current market conditions, shareholders would have to consider the opportunity of realising their investments immediately for a significant premium over the counter’s recent trading prices; however, longer-term shareholders may not be keen to sell out,” said RHB analyst James Koh.

“We believe minority shareholders should accept the offer. If Ron Sim gets close to the 90%-mark, there might be grounds to speculate on a second offer, But, if the takeover offer falls way short of 90%, we believe that would be unlikely,” noted Kenneth Ng, analyst at CIMB. 

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