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Why Did Ron Sim Raise His Buyout Price For OSIM International Ltd Again?

Credit: Terrance Heath

In an announcement made last week on 9 April 2016, OSIM International Ltd (SGX: O23) revealed that its majority owner/founder/chairman/chief executive Ron Sim had increased his offer for the company. Here is what happened.

According to the previous offer document that was released on 5 April 2016, Ron Sim had offered to pay S$1.39 in cash for each OSIM share that he does not own. But, that S$1.39 price was supposed to include a S$0.02 per share dividend that OSIM is paying out today on 13 April, making Ron Sim’s offer effectively S$1.37 per share on an ex-dividend basis.

OSIM’s book closure date for the dividend was 5:00 pm on 6 April and so, it meant that OSIM’s shares were trading on an ex-dividend basis on 4 April. This is where it gets interesting.

As it turns out, Credit Suisse, the bank helping Ron Sim with the privatisation, had bought shares for him in the open market at prices of up to S$1.39 on 5 April even though purchases were supposed to happen only at an ex-dividend price of S$1.37.

Because of those purchases, the regulator for takeovers, the Securities Industry Council, decided that Ron Sim needs to raise his full buyout price for OSIM to $1.41 per share in order to be fair to shareholders who have tendered their shares previously. The S$1.41 price works out to S$1.39 on an ex-dividend basis.

Foolish Summary

And there we have it – a trading error has resulted in Ron Sim bumping up his privatisation offer for OSIM to S$1.39 per share on an ex-dividend basis. It may be a costly error. According to an estimation reported by The Straits Times, Ron Sim may have to fork out S$4.7 million more for OSIM’s shares.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim does not own shares in any companies mentioned above.