The iSymphonic chairs were a sign of things to come from Osim. Asia's largest specialty retailer now plans to buy Brookstone Inc. and its 292 stores for $445 million -- about a 10% premium to its market price -- in a deal which closed on Oct. 5. The acquisition gives Osim a foothold in the U.S. and a chance to augment its network of 540 stores in 26 countries from South Africa to Ukraine. Sim, 46, who owns 50.1% of Osim, is betting that the market for lifestyle products such as exercise bikes, heart monitors, and water purifiers has room to grow. Analysts are generally positive about the deal: Osim's stock is up 30% this year on the Singapore Stock Exchange, beating the broader market's 20% rise. "The deal creates a global 'healthy lifestyle' powerhouse with significant revenue and cost synergies," says James Tan, analyst for brokerage DBS Vickers in Singapore.
Osim, which now holds a 55% stake in Brookstone, is partnering with Temasek Holdings Ltd., the Singapore government investment firm, and Boston private equity group JW Childs Associates to finance the deal with equity and cash. Osim is taking on a hefty $145 million in new debt, bringing its overall liabilities to $200 million. That makes some analysts nervous, but Sim waves off any concerns about Osim's ability to pay off its debts. Temasek and JW Childs will control the remaining 45%, and Brookstone will be delisted from NASDAQ. The Merrimack (N.H.)-based Brookstone will still be led by current CEO Michael Anthony. "The deal will combine the product development capabilities of both the companies, expand our product range, and bring economies of scale," says Anthony.HITTING ITS STRIDE
For Osim, Brookstone's outlets in upscale U.S. malls are the crown jewels, since they account for 90% of the American retailer's $500 million annual business. But Sim wants to expand Brookstone's catalog and online operations, streamline distribution and procurement, and cut costs 10% to 15%. Buying Brookstone will allow Osim to diversify its revenues, 65% of which come from China, Hong Kong, Singapore, and Taiwan. Analysts expect Osim to post profits of $26.5 million this year -- up from $19 million in 2004 -- on $258 million in sales, excluding Brookstone.
Osim, a play on the founder's name, dates to 1979, when Sim started the brand as a 20-year-old with a high school education. Originally set up to market vacuum cleaners and other household basics, Osim hit its stride in the '80s with massage chairs and fitness gear. Osim then began snapping up brands such as the GNC Corp. nutrition store franchises in Southeast Asia, China, and Australia.
Sim wants to improve margins at Brookstone stores by selling even pricier products, such as Osim's $5,000 iDesire massage chairs. At the same time, he wants to leverage the brand by selling Brookstone products at Osim stores and opening Brookstone branches in Asia, Europe, and the Middle East. He can only hope there are enough consumers worldwide ready to pay top dollar for those easy chairs. By Assif Shameen in Singapore