Olympus sticks to defence of M&A deals, scepticism remains

Japan's Olympus Corp on Thursday stuck to its defence of deals that have come under fire since the firm axed its British CEO in a bitter boardroom battle, insisting the acquisitions were strategic and involved no wrongdoing.
But the 92-year-old company's explanations failed to ease investor doubts about the deals, which have sparked worries about Olympus's management and rekindled concerns about corporate governance in Japan.
"The company's problems were matters of disclosure and corporate governance, so even after it said it has revealed everything, I don't think anyone was convinced that it has and questions remain," said Fujio Ando, senior managing director at Chibagin Asset Management.
Olympus Chairman Tsuyoshi Kikukawa resigned on Wednesday in a bid to restore confidence in the endoscope and camera maker, shaken by the public stand-off with ex-CEO Michael Woodford over a massive advisory fee for its acquisition of British medical equipment maker Gyrus and other purchases.
At a news conference in front of more than 100 reporters, new President Shuichi Takayama calmly defended the deals, including the purchase of three domestic firms — a microwaveable cookware maker, a medical waste recycler and a cosmetic firm that together employ around 120 people.
Internal documents leaked by Woodford show those deals cost $773 mln. They have since largely been written off.
"It was our strategy to find new growth areas to reduce our over-reliance on the endoscope business. These three acquisitions were part of that strategy," Takayama said.
The company also defended its handling of the Gyrus deal.
Olympus paid $2.2 bln for the firm in 2008 and handed a record $687 mln in advisory fees to two obscure firms, New York-based AXES America LLC and Cayman Island-based AXAM Investment Ltd.
"This acquisition … has made a big contribution to expanding our core business to date," Olympus said in a statement, adding it did not view the advisory fee as excessive.
Olympus fired Woodford on October 14, just two weeks after his appointment as CEO, saying he failed to understand the company's management style and Japanese culture. Kikukawa then took over Woodford's role.
Woodford says he was sacked for questioning the massive advisory fee for the Gyrus purchase as well as the three other deals, and for urging Kikukawa to step down.
Japanese media, which at first paid little heed to the dispute, appear to have woken up. Takayama's news conference was extended to around 100 minutes after angry reporters insisted on more time.
"We have more questions and you haven't cleared up all our doubts," one Japanese reporter blurted out.
Olympus shares — which have lost more than half of their value since Woodford was fired — surged after the company's latest remarks, rising as much as 24.5% to 1,368 yen.
But market players said the jump did not imply an easing of investor concerns.
Pressed by big institutional investors, Olympus has agreed to appoint a third-party panel to look into the deals.
Japan's Securities and Exchange Surveillance Commission is also looking into the company, sources familiar with the matter told Reuters.