Olympus Corp. (7733) is continuing discussions with Sony Corp. (6758), Terumo Corp. (4543) and Fujifilm Holdings Corp. (4901) about possible tie-ups as the Japanese camera maker seeks to increase its capital in the aftermath of an accounting fraud.
There’s a “50-50” chance Olympus will choose Sony as a partner, and odds are similar companies including Terumo may invest in Olympus, Chairman Yasuyuki Kimoto, 63, said in an interview yesterday. Forming an alliance with Panasonic Corp. (6752) is “less likely,” while the door is “still left open” for Fujifilm, he said.
Olympus’s new management team, led by the former Sumitomo Mitsui Financial Group Inc. (8316) banker, is considering alliance offers from the four companies after revelation of the fraud wiped about $4 billion off its market value. The stock, which plunged 59 percent in 2011, has recovered by more than 10 percent since Kimoto’s team won shareholder approval April 20.
“We need some sort of capital increase rather quickly,” Kimoto said at the company’s headquarters in Tokyo. The discussions probably will continue for at least two months, and the company plans to make a decision by year’s end, he said. Olympus needs to find “a partner or some partners,” he said.
Olympus restated earnings last year, taking a $1.3 billion cut in total equity, after admitting it paid inflated fees on takeovers and overpaid for three Japanese companies to conceal past investment losses. Net assets fell to 46 billion yen ($587 million) as of Sept. 30, from 151 billion yen reported in the previous quarter, according to company filings.
50 Billion Yen
Sony spokesman George Boyd declined to comment. Fujifilm is “still waiting for a reply from Olympus” on its offer, Takao Aoki, a spokesman said.
Olympus also is considering funding through a public share sale, President Hiroyuki Sasa said in an interview last month. Foregoing an alliance would allow Olympus to pursue a business strategy independently, while a tie-up may help accelerate growth in its camera and medical businesses, Sasa said. He said 50 billion yen is a “rough guideline” for how much the company may raise.
Founded in 1919 as a microscope and thermometer business, Olympus is the world’s biggest maker of endoscopes. It controls about 75 percent of the global market for the instruments, which let doctors look inside the body to help detect diseases such as colorectal cancer.
Olympus produced its first camera in 1936 and its first “gastrocamera,” a predecessor to the modern-day endoscope, in 1950, according to the company’s website.
The medical unit is Olympus’s biggest profit generator, accounting for 113 billion yen of operating income in the year ended March 31. The company’s imaging systems unit, which makes Olympus PEN cameras, lost 18 billion yen during the year.
The company is cutting 2,700 jobs, about 7 percent of its workforce, by March 2014, it said in June. Most of the jobs being eliminated are in overseas manufacturing, Sasa said last month. The company will close a plant in the Philippines this year and reorganize others, it said June 8.
Olympus is projecting net income of 7 billion yen for the year started April 1, compared with a 49 billion-yen loss a year earlier. Operating profit may be 50 billion yen, up from 35.5 billion yen a year earlier, the company said June 8.
The company’s stock plunged as low as 460 yen last year after former President Michael Woodford was dismissed Oct. 14 and publicly questioned fees paid by Olympus for takeovers. The stock closed down 2.8 percent at 1,347 yen in Tokyo trading yesterday.
Woodford settled a London lawsuit against his former employer under whistleblowing rules on May 29. Olympus settled for 10 million pounds ($15.5 million), the company said June 8.
To contact the reporters on this story: Mariko Yasu in Tokyo at firstname.lastname@example.org; Takashi Amano in Tokyo at email@example.com
To contact the editor responsible for this story: Michael Tighe at firstname.lastname@example.org