Ron Sim, the founder of luxury massage chair maker OSIM International has made an unconditional cash offer worth $310 million to buy out minority shareholders in the company to take the company private.
Sim, who controls 68.31% of the company, is offering to buy the shares at $1.32 each through his holding company Vision Three. That’s a 7.8% premium to its last traded price of $1.225 on March 1.
OSIM shares have tumbled 46% in 2015, the biggest annual decline since the 2008 global financial crisis. Net profit fell 50% to $51 million as the currency turmoil in Asia dampened sales, the company said in January.
“The offer provides an opportunity to OSIM’s minority shareholders to sell their stake at a significant premium over the prevailing share price amidst challenging market conditions,” Sim’s holding company said in a statement to the Singapore Exchange.
In a note this morning, brokerage Maybank Kim Eng advises shareholders hold out for a better offer.
Maybank Kim Eng notes that at the offer price of $1.32 it is valued at 9.1 times historical EVIEBITDA, 16.3 times trailing P/E and 2.6 times P/B.
These valuation levels are “somewhat below” regional specialty retailers, which on average are priced at 14.8 times EV/EBITDA, 33 times trailing P/E, and 4.1 times P/B, says Maybank.
The brokerage also notes that OSIM has been sold down so much in the last 12 months, from the $2 level between late 2013 and 2014. “As such, investors might hold out for a better offer.”
Meanwhile, OCBC recommends that minority shareholders to accept the offer, noting that Sim’s offer price represents a 31.8% and 33.5% premium over the volume weighted average price for the corresponding one-month and three-month periods, respectively.
The offer price of $1.32 is also 61% higher than OCBCs fair value on the company at 82 cents.
“Given the tough environment ahead and the lack of strong drivers for earnings, we view this offer to be reasonable and recommend shareholders to accept the offer,” says analyst Jodie Foo in the note, hours after the privatisation offer was announced.
This article first appeared in The Edge Singapore Market Report.