Bloomberg News

Olympus to Form Independent Panel to Review Past Takeovers

October 21, 2011

(Adds company comment in fourth paragraph)

Oct. 21 (Bloomberg) -- Olympus Corp. will form an independent committee, including attorneys and accountants, to investigate the company’s past acquisitions after letters from its largest shareholders urged such a review.

The Japanese camera and medical equipment maker will announce details as soon as they are decided, according to a statement to the Tokyo Stock Exchange today.

Nippon Life Insurance Co., the largest Olympus shareholder, Southeastern Asset Management Inc. and Harris Associates LP have asked the company to respond to investors’ concerns about takeover payments, which prompted a 50 percent plunge in the stock price. Michael C. Woodford, fired as chief executive officer last week, made public a PricewaterhouseCoopers report that said the company may face regulatory and legal scrutiny because of payments made to advisers in the acquisition of Gyrus Group Plc in 2008.

“We’re trying to set up an independent committee as soon as possible but cannot say at the moment by when we will start it,” Yasutoshi Fujiwara, a spokesman for Olympus, said by phone after the announcement.

Fees Double

Olympus, which started business 92 years ago, earlier this week confirmed it paid $687 million in fees to advisers for its $2 billion purchase of Gyrus, almost double the 30 billion yen ($391 million) Chairman Tsuyoshi Kikukawa disclosed a day earlier.

The Tokyo-based company, the world’s biggest maker of endoscopes, has lost more than $4 billion of its market value in the six trading days since was fired. The share price fell 6.8 percent today to close at 1,231 yen, the lowest since 1999, at the end of trading in Tokyo today.

Nippon Life requested Olympus to take “prompt” action to address investor distrust regarding the company’s corporate governance, Akira Tsuzuki, a Nippon Life spokesman said yesterday.

Harris Associates, the seventh-largest shareholder of Olympus, sent a letter today to the company’s board and to the Tokyo Stock Exchange seeking an independent probe on 2008 acquisitions, David Herro, chief investment officer of international equities at U.S.-based Harris, said in an e-mail.

Cayman Islands-incorporated AXAM Investments Ltd., one of the two advisers that received the fees that were more than a third of the $2 billion purchase price, was removed from the local registry in June 2010 for non-payment of license fees, according to the PricewaterhouseCoopers report. The PwC report said it couldn’t establish who were the owners of AXAM.

Merger and acquisition advisory fees depend on individual deals and usually range from 1 percent to 5 percent, two people with knowledge of such deals said, declining to be named because they weren’t authorized to talk to the media.

Goldman Sachs Group Inc. suspended its rating on Olympus this week saying the “adequacy” of the company’s accounting practices regarding past acquisitions has become unclear. Nomura Holdings Inc. and JPMorgan Chase & Co. are also among brokerages that suspended their ratings on the company.

--With assistance from Go Onomitsu in Tokyo. Editors: Kyung Bok Cho, Peter Langan

To contact the reporters on this story: Chris Cooper in Tokyo at ccooper1@bloomberg.net; Mariko Yasu in Tokyo at myasu@bloomberg.net

To contact the editor responsible for this story: Peter Langan at plangan@bloomberg.net


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