Shares in lifestyle products company Osim International fell yesterday after the company announced its latest issuance of convertible bonds.
The stock closed down eight cents or 2.8 per cent to $2.74, which was also its intra-day high. At one point, it was down by as much as 18 cents or 6.4 per cent to $2.64.
Osim announced on Tuesday that it was planning to issue up to $200 million in five-year convertible bonds, which include an upsize option of $50 million.
It said yesterday that the bonds were fully placed to institutional and accredited investors, who took up $170 million in the aggregate principal amount with an upsize option of $30 million.
The bonds due in 2019 will not bear interest and have a conversion price of $3.525 per share.
The final price lies at the lower end of the initial indicative conversion range of between $3.525 and $3.737.
Osim said on Tuesday that it intends to use the net proceeds to boost its well-being and lifestyle business in Asia.
The company could also use it to finance potential acquisitions.
That the money could be used for acquisitions may have put some investors off, as they are still spooked by Osim's investment in United States retailer Brookstone that eventually went bust.
Osim, together with Temasek Holdings and US buyout firm JW Childs Associates, bought Brookstone for US$456 million (S$569 million) in 2005.
Brokerage OSK-DMG, however, is upbeat about Osim's latest move. Analysts James Koh and Juliana Cai noted yesterday that the terms are very favourable and is a relatively cheap source of funding for the company.
They added that the money raised will buff up Osim's cash holdings to around $450 million, putting it in a strong position to capitalise on merger and acquisition (M&A) opportunities.
"We do not think an M&A deal is immediately imminent, as management remains patient on valuations," they added.
"Osim has proven its ability to grow businesses in Asia and we think any M&As ought to provide yet another engine of growth in the long term."
HSBC is the sole bookrunner and sole lead manager for the issue.
This article was first published on August 28, 2014.
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