• Bloomberg


Olympus Corp. said Friday it was postponing the release of second-quarter earnings pending the results of a probe into $1.4 billion in writedowns and fees related to the company’s acquisitions.

The company had been due to announce results next Tuesday, but now aims to do so by the end of the month, spokesman Tsuyoshi Kitada said.

Olympus on Tuesday asked a six-person independent committee — that includes two former judges and a retired prosecutor — to probe allegations by former President Michael C. Woodford after he was axed Oct. 14.

Olympus shares plummeted as much as 12 percent in Tokyo on Friday, adding to plunge that has wiped out more than half the camera and medical equipment maker’s market value since Woodford’s dismissal.

Only three weeks ago, analysts including Goldman Sachs Group Inc.’s Toshiya Hari and Kenya Moriuchi had been anticipating next week’s planned earnings announcement as a possible turning point for Olympus’ shares.

“The near-term catalyst for the stock is likely to be the second-quarter results,” Hari and Moriuchi wrote in a 47-page report dated Oct. 12, advising investors to buy the company’s shares and targeting a price gain of more than 50 percent in two years. “We have high hopes for Mr. Woodford,” they wrote, six months after he was named Olympus’ first foreign president.

Unknown to Goldman and other securities firms that gave positive reports on Olympus in the past two months, Woodford was locked in a feud with his board over the company’s acquisitions and which resulted in his dismissal.

Investors including Harris Associates L.P. say Olympus is failing to answer questions over the takeovers.

“They just keep denying that anything illegal or excessive has happened,” David Herro, the Chicago-based chief investment officer for international equities at Harris, said this week. “Clearly they’ve done something excessive (that leads) us to question whether their first statement is correct.”

Harris held 10.9 million Olympus shares as of June 30, a 4 percent stake that makes it the company’s second-biggest overseas investor.

Japan lacks an efficient framework to mediate internal disputes or to reassure investors once allegations surface, said Nicholas Benes, who heads the Board Director Training Institute of Japan, a public-interest organization that aims to improve corporate governance, according to its website.

“Everyone except the person who was sacked is speaking with one voice, saying something completely different from what he’s saying and not explaining things,” Benes said. “The perceptional aspects of this are absolutely hideous.”

After being fired, Woodford went public with the concerns he raised with then Chairman Tsuyoshi Kikukawa over $687 million Olympus paid in advisory fees in the $2 billion acquisition of U.K. medical equipment company Gyrus in 2008, and a total of $700 million in writedowns in three other takeovers. All the transactions involved payments to Cayman Islands companies or special purpose vehicles whose beneficiaries are unknown.

Kikukawa stepped down Oct. 26. In a statement read out to reporters later that day, he denied any wrongdoing and said he would remain on the company’s board.

Woodford impressed at his first public outing, promising cost cuts and “to raise the level of scrutiny” over mergers and acquisitions, according to Goldman’s report. “One of the primary reasons behind our faith in Olympus is the change in management,” it said.

In Europe, Woodford cut costs and improved profitability, Goldman said.

Analysts including Hiroshi Torii at Cosmo Securities Co. in Tokyo took his promotion as a signal Olympus, the world’s biggest endoscope maker, would focus on its faster growing medical division. The company’s camera arm lost ¥15 billion last year.

“Woodford was the first president who specialized in the medical business, and that drew my attention,” said Torii, adding that he initiated coverage Sept. 26 with a “neutral plus” rating after meeting Olympus investor relations officials.

Sept. 26 was also the day Woodford wrote to Kikukawa demanding to know who received the Gyrus fees and why they were so high, according to the letter, which was circulated to the board. He said he would “initiate the actions I believe fit and proper to ensure the appropriate scrutiny of the various transactions” unless he was given an answer.

Woodford’s fight over the takeovers began almost three weeks before Goldman elevated Olympus to its list of 25 best Japanese equity investments, according to letters from Woodford to Executive Vice President Hisashi Mori and Kikukawa.

The FBI is probing the allegations, according to Woodford. Olympus is also under scrutiny by Japanese regulators, officials said.

The probes center on the more than $600 million in fees paid to AXAM Investments Ltd., a now-defunct Cayman Islands fund connected to U.S.-based Japanese banker Hajime Sagawa. Mori, Olympus’ executive vice president and a key official involved in the Gyrus takeover according to U.K. company records, on Oct. 27 declined to name the person who introduced Sagawa to Olympus.

Repeated attempts to reach Sagawa at his registered address in Boca Raton, Florida, have been unsuccessful, as have efforts to trace the owners of Cayman entities paid about $940 million in the three other acquisitions.

“The money went to those shareholders,” Mori said at the Oct. 27 briefing in Tokyo. “We have no idea who they are.”

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