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Terumo Plans Merger With Olympus to Scupper Sony Bid

July 26, 2012

Terumo Plans Merger With Olympus to Scupper Sony Investment Bid

An Olympus Corp. video endoscope. Olympus’s management team, led by Kimoto and President Hiroyuki Sasa, has been considering alliance offers from the two companies as well as Panasonic Corp. and Fujifilm Holdings Corp. after an accounting fraud scandal wiped about $4 billion off its market value. Photographer: Kiyoshi Ota/Bloomberg

Olympus Corp. (7733) rallied the most in six months in Tokyo trading after Terumo Corp. (4543) sought to out maneuver Sony Corp. (6758) by investing 50 billion yen ($640 million) and merging with the camera maker.

Terumo, Asia’s biggest maker of medical devices, wants to form a committee with Olympus to discuss a merger, Terumo spokesman Tetsuya Kumei said by telephone today. Tokyo-based Olympus is also in discussions with Sony and Fujifilm Holdings Corp. (4901) about possible tie-ups, Olympus Chairman Yasuyuki Kimoto said in a July 23 interview.

A combined Terumo-Olympus would rank among the top six medical equipment suppliers worldwide, from 12th and 13th positions now, Terumo said in a statement today. Terumo and Sony are proposing similar investments, said Naoki Fujiwara, chief fund manager at Shinkin Asset Management Co., which manages about $6.3 billion. Olympus needs more capital after an accounting fraud wiped about $4 billion off its market value.

“It’s good to have a rival to Sony because the competition will drive up the value of Olympus,” Fujiwara said by telephone today. “Terumo will help strengthen its medical devices business, while Sony will help turn around its camera business and improve its imaging technology for endoscopes.”

Founded in 1919 as a microscope and thermometer business, Olympus is the world’s biggest maker of endoscopes, used to peer inside the body. It controls about 75 percent of the global market for the instruments, which are used to diagnose diseases such as colorectal cancer.

Stock Rally

Terumo shares declined 0.8 percent to close at 3,070 yen in Tokyo trading. Olympus jumped 9.6 percent to 1,400 yen, the biggest one-day gain since Jan. 10.

The stock, which plunged 59 percent in 2011, has recovered by 38 percent this year. Olympus has a market value of 380 trillion yen, while Terumo is worth 583 trillion yen.

No agreement has been reached with Olympus on the merger proposal, Terumo said in the statement, posted on its website.

Terumo is appealing to Olympus shareholders by disclosing an outline of its offer, while Olympus is in final talks with Sony on a capital tie-up, the Nikkei newspaper reported today. George Boyd, a Sony spokesman, declined to comment.

Olympus’s management team, led by Kimoto and President Hiroyuki Sasa, has also been considering alliance offers from Panasonic Corp. (6752)

Needing Capital

“We need some sort of capital increase rather quickly,” Kimoto said in this week’s interview in Tokyo. The discussions probably will continue for two months or more, and the company plans to make a decision by the end of the year, he said, adding that Olympus needs to find “a partner or some partners.”

Forming an alliance with Panasonic is ‘less likely,’’ while the door is “still left open” for Fujifilm, Kimoto said. Fujifilm is “still waiting for a reply from Olympus” on its offer, Takao Aoki, a spokesman said July 24.

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 as of Sept. 30, from 151 billion yen reported in the previous quarter, according to company filings.

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.

To contact the reporter on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net

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


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