Fujifilm braces for Olympus takeover snub

Bloomberg

Fujifilm Holdings Corp. may get snubbed by cross-town rival Olympus Corp. in its attempt to move further away from the photographic film business that dragged down industry pioneer Eastman Kodak Co.

“We aren’t too optimistic” that Olympus will welcome a takeover approach or collaboration, CEO Shigetaka Komori said in a recent interview at Fujifilm’s Tokyo headquarters. “Olympus will most likely want to run the business by itself.”

The two companies together would control about 85 percent of the global market for the tiny cameras that doctors use to peer inside patient’s bodies, according to Komori. The 72-year-old CEO wants to add Olympus — which lost more than half its market value last year amid an accounting scandal — to the ¥650 billion Fujifilm spent on takeovers in the past decade to buffer it from a collapse in color film demand that pushed Kodak to the brink of bankruptcy last month.

Fujifilm is the best fit for Olympus, which holds a 70 percent market share for endoscopes, Komori said, adding that antitrust implications would need to be worked out. The devices are one of six growth pillars he has targeted for growth.

“Many of the things Kodak did were short-term and halfway measures, and they weren’t enough,” Komori said. “Japanese companies make long-term investments, looking 10 to 20 years ahead. That’s the difference between us and Kodak.”

Investors, however, aren’t persuaded, and Fujifilm’s shares tumbled 38 percent on the Tokyo Stock Exchange last year, twice the drop of the Topix index.

“Fujifilm has planted the seeds for growth,” said Kogo Horie, a technology analyst at Daiwa Securities Capital Markets who has a “neutral” rating on Fujifilm. “But I can’t see the overall strategy and synergies between the businesses it bought. It’s not yet clear how they will contribute to earnings.”

Komori joined Fujifilm in 1963 and became president in 2000, at the peak of global color film demand. He has overseen more than 40 acquisitions and partnerships in industries ranging from pharmaceuticals to photocopiers, including stakes in FujiXerox Co. for ¥160 billion in 2001 and a controlling stake in drug-maker Toyama Chemical Co. in 2008.

Fujifilm agreed to buy SonoSite Inc., a maker of portable ultrasound machines, for about ¥76.2 billion in December.

More acquisitions can’t be ruled out in pharmaceuticals and medical devices if the right opportunities arise, Komori said in the interview. The company, which he says should resemble a conglomerate such as 3M Co., has a four-member team that handles potential deals, he said.

Fujifilm, established in 1934, earns 44 percent of its revenue from printing, 41 percent from flat-panel display materials, optical devices, pharmaceuticals and medical systems, and 15 percent from color film and digital cameras.

Komori said he’s most excited by the potential of an experimental drug for Alzheimer’s disease. The product, known as T-817MA, is in midstage tests and may finish advanced studies in two to three years, he said.

Komori, who has yet to name a successor, said he will probably run the company for at least another two to three years, when his burgeoning business units are better established. Meantime, Fujiflim, which has ¥2.2 trillion in annual sales and 81,300 employees, isn’t likely to undergo a name change, even as it tries to move away from the film business.

“The business is based on the technologies we’ve cultivated from developing color film,” said Komori. “Everyone knows Fujifilm through photos. It’s still a popular brand.”