Bloomberg News

Olympus Must Make Probe Independent, No. 3 Shareholder Says

October 28, 2011

(Updates with Olympus comment on probes in last paragraph.)

Oct. 28 (Bloomberg) -- Olympus Corp.’s third-largest shareholder urged the company to ensure the independence of an internal probe into fees paid in takeovers, including $687 million related to the 2008 acquisition of Gyrus Group Plc.

“An independent third-party committee that everybody is going to see as objective has got to be the focus, and for them to oversee an independent audit by an outside auditor,” Josh Shores, a London-based principal for Southeastern Asset Management Inc., said in a phone interview yesterday.

Shores said he sent a letter to the Tokyo-based company asking that a “well-known Japanese” former chief financial officer of a “blue chip” company be included in the panel. Olympus, the world’s largest maker of endoscopes, has lost more than half its market value since Chief Executive Officer Michael C. Woodford was fired after challenging the takeover fees. The company has vowed to form an independent committee to investigate the acquisitions.

Olympus has yet to make public who received the Gyrus fees, which amounted to about 34 percent of the value of the $2 billion acquisition. The company released a statement yesterday saying the amount was “not unreasonably high.”

Such payments usually range from 1 percent to 5 percent of the transaction value, two people with knowledge of such deals said, declining to be identified as they weren’t authorized to talk to the media.

Requesting Details

“Where did this money go?” Shores said in the interview. “How were these payments determined? We need a lot more details on how the fee was determined in Gyrus, for example. How could that large of a fee be justified?”

Olympus will probably form an investigation committee within two weeks, Shuichi Takayama, the president appointed this week to replace Tsuyoshi Kikukawa, who stepped down 12 days after taking Woodford’s place, said on Oct. 26. He declined to say when the panel is expected to complete its work or to elaborate on who would be selected for it.

Olympus acknowledged receiving the letter from its third- largest shareholder and has yet to respond, said Shores of Southeastern, which oversees about $30 billion in assets. Shores declined to identify the former CFO he asked to be included in the panel, saying the matter is private.

‘Nothing Illegal’

There was nothing illegal about the 2008 takeover of Gyrus, a U.K. medical-equipment manufacturer, Tokyo-based Olympus said yesterday. The company also said the purchases of three Japanese companies unrelated to its main businesses were part of an expansion into new areas,

Olympus dropped 10 percent today to close at 1,217 yen at the 3 p.m. close of Tokyo trading.

The U.S. Federal Bureau of Investigation is probing the payments by Olympus to advisers the company has yet to identify, Woodford said yesterday in a Bloomberg television interview. The Securities and Exchange Commission has also begun its own inquiries, the New York Times reported today, citing unidentified people who were briefed on the matter.

The Tokyo Stock Exchange will ask Olympus to disclose the facts surrounding the payments, Atsushi Saito, the bourse’s president, said today. “It’s the exchange’s duty to ask Olympus to disclose the facts in a fair manner,” Saito said.

Olympus Corp. hasn’t received any request for information from regulators or other investigators, Yoshiaki Yamada, a Tokyo-based spokesman for the company, said today.

--With assistance from Takashi Amano in Tokyo. Editors: Dave McCombs, Ben Richardson

To contact the reporters on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net; Lindsay Fortado in London at lfortado@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net


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