Trading bungle forces Osim to raise offer price

Taking firm private may cost Ron Sim $4.7m more after takeover entity bought shares in open market above $1.37

On Tuesday last week, Mr Sim said a revised offer of $1.37 a share to buy all Osim shares he did not already own was final.
On Tuesday last week, Mr Sim said a revised offer of $1.37 a share to buy all Osim shares he did not already own was final.BT FILE PHOTO

A costly trading bungle is forcing Osim International chief executive Ron Sim to pay as much as $4.7 million more in his bid to take the massage chair firm private.

On Tuesday last week, Mr Sim vowed that a revised offer of $1.37 a share to buy all Osim shares he did not already own was final. This did not include a two-cent dividend.

So Osim shareholders were surprised - and delighted - to be told on Friday night of a new final price of $1.39 a share, or $1.41 including the final dividend.

However, it was only yesterday afternoon that more details were revealed about the increased offer.

Mr Sim's hand had been forced by what market watchers say is a rare and unusual error on April 5.

The takeover entity Vision Three bought shares on the open market at prices above the $1.37 offer price then.

"Shares were inadvertently purchased on the SGX on April 5 between the prices of $1.38 and $1.39 for and on behalf of (Vision Three), even though the shares were trading on an ex-dividend basis," Credit Suisse, which is managing the deal, said in a Singapore Exchange announcement yesterday afternoon.

This means that Vision Three had given some sellers a higher price than the offer price and under Singapore's takeover laws, this is not permissible, unless the price is raised for everyone else as well.

The latest statement shed more light on figures Credit Suisse previously disclosed in a filing on April 8, which showed that some $23.5 million was spent on buying shares priced between $1.38 and $1.39 without any reference to the transaction being an error.

As a result of the error, Vision Three was ordered by the Securities Industry Council (SIC) to raise the offer price to no less than $1.39 per share, or $1.41 including the final dividend. This was done in line with rule 21.1 under the Code on Take-overs and Mergers.

The rule states that if an offeror buys shares at above the offer price, it must then raise its offer to no less than the highest price paid.

The SIC falls under the umbrella of the Monetary Authority of Singapore, and oversees the code.

Mr Sim currently owns around 70 per cent of Osim shares, and the extra two cents in the final offer may see him forking out around $4.7 million more for the deal.

SIC's order to Vision Three was in line with a key principle of the code, Gibson Dunn partner Robson Lee said.

"It's a cardinal principle to ensure the equality of treatment. Meanwhile, the SIC may also want to look into whether the situation warrants compensation to those who sold their shares, on April 5, at $1.37."

He added: "This is a very unusual error, and one that I don't recall having seen in recent years. It's surprising because obviously the deal is being advised and monitored by highly experienced professionals."

The statement yesterday did not state which party committed the error, but stressed that the $1.39 ex-dividend offer is final.

The offer will close on April 29 at 5.30pm.

Osim shares closed two cents or 1.46 per cent higher at $1.39 yesterday, reflecting the revised final offer price.

A version of this article appeared in the print edition of The Straits Times on April 12, 2016, with the headline 'Trading bungle forces Osim to raise offer price'. Subscribe