Bloomberg News

Fired Olympus CEO Offers to Return Once ‘Toxic’ Board Removed

October 25, 2011

Oct. 26 (Bloomberg) -- Olympus Corp. former Chief Executive Officer Michael C. Woodford said that the company’s “toxic” board must go and that he would be ready to run the company again if the majority of shareholders wanted him to.

Woodford and the Tokyo-based camera and medical-equipment maker’s Chairman Tsuyoshi Kikukawa are feuding after the Briton publicly questioned $687 million paid in fees for a 2008 takeover. Woodford says he was fired for challenging the transaction; Olympus says he was axed over his management style.

Shares in the 92-year-old company slumped more than 50 percent since the board fired its first non-Japanese CEO six months after he was appointed promising to cut costs and debt and overhaul management. Olympus last week promised to set up an independent committee to probe its acquisitions after three of its biggest shareholders asked for an explanation of the fees paid in the $2 billion takeover of Gyrus Group Plc in 2008.

“The board has to go, they’re all toxic, they are all contaminated,” Woodford said in an interview with Bloomberg Television yesterday, adding that he would not step down as a director of the company. “Shareholders have contacted me and their basic message is ‘please don’t resign.’ I would go back if the majority of shareholders choose that.”

Olympus, the world’s biggest maker of endoscopes, didn’t commit any wrongdoing and previous acquisitions were carried out through proper procedures, Kikukawa said in a statement posted on the company’s website yesterday. The company will disclose information on the matter in a timely fashion, he said.

Explain ‘Next Time’

In a four-page letter to employees posted Oct. 24, a copy of which was given to Bloomberg News, he accused Woodford of using his position to leak “company secrets” and said he aims “to ruin the credibility” of Olympus. The advisory fees were not mentioned until the last line, which said: “I think I’ll explain about Gyrus and the other companies next time.”

After he was fired, Woodford, 51, made public a PricewaterhouseCoopers report he commissioned that said the company may face regulatory and legal scrutiny because of payments made to advisers in the acquisition of Gyrus, a London- listed medical equipment manufacturer.

Woodford said he asked the U.K.’s Serious Fraud Office to investigate the fees in the takeover. He is cooperating with the U.S. Federal Bureau of Investigation, according to a person familiar with the matter who declined to be identified because the probe isn’t public.

FBI Probe

The FBI is investigating payments by Olympus to advisers related to the 2008 acquisition, said another person familiar with the inquiry who declined to be identified because they weren’t authorized to speak publicly about it. J. Peter Donald, a spokesman for the FBI’s New York office, declined to comment.

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

Cayman Islands-incorporated AXAM Investments Ltd., which received $670 million of the payments, was removed from the local company registry in June 2010 for non-payment of license fees, three months after receiving its final fees from Olympus, according to the PwC report.

Olympus conducted a previous internal probe into the Gyrus acquisition that concluded it was “not able to discover any illegal or unjust points” in the fees, according to a 2009 copy of the report obtained by Bloomberg News.

Shareholders

The investigation, which was conducted by an attorney, an accountant and a professor, was published before Olympus paid $620 million to AXAM to repurchase preferred shares that formed part of the advisory fee.

Nippon Life Insurance Co., Olympus’s largest shareholder, Southeastern Asset Management Inc. and Harris Associates LP have sought more information from the company and urged it to respond to the allegations. Shares in Olympus fell as much as 8.5 percent in Tokyo trading today.

Woodford also questioned about $800 million Olympus paid in other takeovers, subsequently writing down more than three- quarters of those companies’ value in the same year.

“They paid $800 million for three Mickey Mouse companies with no turnover to speak of,” he told Bloomberg TV. “It’s just inexplicable.”

There are “lots of questions” over “how those companies were identified and paid for and the connection between them.”

Woodford said the U.K.’s Metropolitan Police had advised him not to return to Japan at the moment and that he will only feel safe in Japan once questions over the fees have been answered.

--With assistance from Su Keenan in New York and Mariko Yasu in Tokyo. Editors: Ben Richardson, Peter Langan

To contact the reporters on this story: Ben Richardson in Hong Kong at brichardson8@bloomberg.net; Lisa Murphy in New York at lmurphy25@bloomberg.net

To contact the editor responsible for this story: Ben Richardson at brichardson8@bloomberg.net


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