The Straits Times / The Business Times News on OSIM

OSIM and Brookstone network will extend reach

It will enhance their presence in Asia and US; shops likely in HK, S'pore by year-end

OSIM International's proposed $752 million acquisition of American specialty retailer Brookstone will not only give it a valuable outlet for its products in the United States, but will also introduce Brookstone to key Asian markets.

Brookstone president and chief executive Michael Anthony, who was in Singapore yesterday for a two-day visit, said OSIM's network and expertise in Asia would give the US company an invaluable foothold in the fast-growing Asian market.

'When you look at the world, it's obvious that the biggest future growth is going to be in Asia,' he said at a press conference.

Mainboard-listed OSIM's plan to lead a consortium comprising Temasek Holdings unit Temasek Capital and United States-based private equity firm JW Childs in a buyout of Brookstone was announced last week.

Brookstone currently operates a 288-store retail network located in high-traffic regional malls and airports across 41 states in the US and Puerto Rico.

The company sells lifestyle gadgets such as massage chairs, electronic products and tools. OSIM's products, which also include massage chairs, will be marketed in the US through Brookstone's healthy-lifestyle division.

If the deal is successful, the acquisition is expected to contribute between 9 and 15 per cent to OSIM's bottom line, analysts said.

Mr Anthony and OSIM founder and chief executive Ron Sim both said that the deal, set to be completed by the end of July pending shareholder and regulatory approval, will help both firms cut costs and lift revenues.

'If OSIM were to attempt to set up a network similar to what Brookstone currently has in the US, it would take us 15 years,' Mr Sim said.

He also said yesterday that Brookstone is expected to cut costs through bulk purchasing and by taking advantage of OSIM's sourcing network in Asia.

OSIM currently operates a point-of-sales network of more than 560 outlets in the region, and in Australia, Africa, the Middle East, Britain and North America.

Mr Sim said that he expects Brookstone Asia to set up its first few stores by the last quarter this year, most likely in Singapore and Hong Kong, once approval is given for OSIM's bid for Brookstone.

'Brookstone Asia will be managed by an Asian team to be set up later,' he added.

GK Goh analyst Kerryn Tay said in a report released on Tuesday that OSIM would be able to help boost Brookstone's margins in Asia by cutting out middlemen from the sourcing process.

'Brookstone sources about 70 per cent of its products from Asia, mainly through middlemen. This is reflected in its lower...margins compared with OSIM.

'In fact, some Brookstone-brand products are manufactured by OSIM's 30 per cent-owned associate in Suzhou,' the report said.

When asked if Brookstone's gadgets would be able to compete with the extensive range of low-cost competitors producing similar products in markets such as Hong Kong and China, Mr Anthony said that the firm's proprietary designs would be able to keep them ahead of the pack.

'We design some 225 new products each year. Our design team's original ideas and products will keep us ahead of the rest,' he said.

He said that 65 per cent of all the company's products were manufactured in China, with a further 15 per cent made in the US, and the remainder in countries such as Canada and Mexico, and in Europe.