The Straits Times / The Business Times News on OSIM

Osim confident on Brookstone buy

Firm is undeterred by expected Q2 loss, sale of gardening division

IT is full sail ahead for Osim International's planned purchase of Nasdaq-listed Brookstone Inc.

The Singapore healthcare group is not deterred by Brookstone's announcement on Wednesday of an expected second-quarter loss of 20-22 cents a share before any items and of the planned sale of its gardening products division.

Brookstone is an American product developer and speciality retailer. The New Hampshire-based company said it planned to sell its Gardeners Eden business, which had US$16 million in sales and US$3.6 million pre-tax operating losses in FY2004. Gardeners Eden provides garden-inspired home products through five retail outlets, catalogues and the Internet.

Brookstone also said total company sales fell 6.5 per cent year-on-year to US$62.6 million in the eight weeks ended June 25.

When contacted, Osim's founder and chief executive Ron Sim seemed unperturbed. 'We are still pretty bullish on the company because the US lifestyle gifts business always concentrates on the last quarter.'

BT understands that due to the seasonal nature of speciality retailing, Brookstone generally carries a loss over the first three quarters and makes its profit for the year in the fourth quarter.

Mr Sim said: 'A company should not be measured by just one or two quarters but by its full year. In fact, I see it as an opportunity to do better rather than a concern because with Osim products coming into Brookstone, we must honestly be able to make some differences over time.'

He said Osim was supportive of Brookstone's decision to sell Gardeners Eden, and he did not believe there would be more divestments in the future.

Brookstone's chairman, president and CEO Michael Anthony reportedly said, regarding the sale: 'The divestiture of Gardeners Eden will allow Brookstone to dedicate all of its energy and resources to our core Brookstone business.'

On April 15, Osim said it was leading a consortium, including a unit of Temasek Holdings, to stage a US$456 million acquisition of Brookstone. The consortium will buy all of Brookstone's common shares at US$20.50 per share and Osim is expected to own more than 50 per cent of the company eventually.

In March 2005, Brookstone said it believed it could deliver earnings of between US$1.20 and US$1.25 per diluted share in FY2005.

Mr Sim reiterated yesterday that there is 'tremendous potential' for Osim to channel its signature massage chairs through Brookstone's 288 retails outlets in the US.

Osim, which expects acquisition to be completed by August, is holding an extraordinary general meeting on July 11.

Yesterday, Osim closed 2 cents lower at $1.07, while Brookstone continued to hover above US$20 after its shares shot up from around US$15 in April.