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Brookstone Deal Could Signal Many More by Overseas Interests

Brookstone's acquisition could be the first of many instances of overseas companies buying U.S.-based direct marketing interests, according to an industry expert.

“It's all based on the dollar value, the size of the market and that several continents have become good at DM,” said Donald R. Libey, managing director of Libey-Concordia, Philadelphia, advisers and investment bankers to the catalog industry.

Many Asian companies have an advantage over possible European suitors, Libey said, as Asia is a manufacturing center, unlike Europe or the United States.

“This creates the potential for vertical integration,” he said.

Brookstone was acquired by a group of investors led by Osim International Ltd., a lifestyle products marketer based in Singapore. The deal is worth $456 million.

The first Brookstone stores in Asia will open in Singapore and Hong Kong before the end of the year. Brookstone operates 288 U.S. stores, including in Puerto Rico.

“[Brookstone] will get a gross-margin pop here from importing product here, and then will export it right back, and it will have the panache of being American,” Libey said.

Osim International is contributing $90 million toward Brookstone's buyout and getting a 55 percent stake, according to news reports. Brookstone senior management will invest $8 million of its own money in the newly formed Osim Brookstone Holdings LP, which will be run as a separate entity under the existing management team. Osim Brookstone's other investors are Singapore-based investment firm Temasek Holdings and private equity firm JW Childs Associates, Boston.

In the United States, Brookstone already has started selling Osim massage chairs and other healthy-lifestyle products, according to Dow Jones.

Osim founder/CEO Ron Sim and Brookstone CEO Michael Anthony discussed their plans during a media briefing in Singapore yesterday, the Dow Jones Newswire reported.

Libey also thinks the deal represents a platform for Osim. He expects to see the company complete additional U.S. acquisitions.

“They have chosen the consumer lifestyle area, which lends itself to lots of imports,” he said.

Larry J. West, president of West Cos. Inc., a New York investment bank that handles catalog transactions, commented on Brookstone's overseas expansion.

“It looks like [the buyers] think the brand has global potential,” he said.

West estimated Brookstone's annual catalog sales at $25 million and Internet sales at $75 million. Compare these figures with the company's 2004 sales volume of $499 million, and it suggests that this deal is mainly about the retail business, according to West.

Osim was founded 25 years ago with Sim marketing handheld massagers and foot reflexology items. The company has 560 owned and franchised retail outlets in Hong Kong, Taiwan, China, Singapore, Malaysia, the Middle East and Australia. It sells a range of lifestyle products, including a line of massage chairs. Its revenue totaled $332 million in 2004, a 16 percent gain over the previous year.

Osim is also in the process of acquiring Global Active Ltd., the Singapore-based franchisee for GNC healthcare supplements in Singapore, Malaysia, Brunei and several U.S. military and naval bases in the region.

Chantal Todé covers catalog and retail news and BTB marketing for DM News and DM News.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters

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