By Chris Cooper and Takashi Amano - Oct 25, 2011 2:11 PM GMT+0700
Olympus Corp. (7733) said its former chief executive officer used his position to leak “company secrets” by questioning $687 million paid to advisers on a takeover and that he aims “to ruin the credibility” of the camera maker.
The 92-year-old Japanese company said it was “considering legal action” against Michael C. Woodford, according to a letter posted on its internal website yesterday, a copy of which was given to Bloomberg News. Olympus fired Woodford on Oct. 14, citing disagreements over his management style.
The statement came after Olympus employees received an e- mail saying Chairman Tsuyoshi Kikukawa would respond to Woodford’s allegations, according to two people who declined to be named because they were not authorized to speak for the company. Olympus last week said an independent committee would investigate its acquisitions after three of the company’s biggest shareholders asked for an explanation of the fees paid in the $2 billion, 2008 takeover of Gyrus Group Plc.
“I am sure you all want to know more,” the unattributed statement said. “I will continue to speak out. My next message will be about Gyrus.”
FBI Investigation
Woodford has made public a PricewaterhouseCoopers report that said the company may face regulatory and legal scrutiny because of payments made to advisers in the Gyrus acquisition.
Kikukawa “has to answer the fundamental question: Why did he pay $687 million in adviser fees?” Woodford said in a telephone interview from London today. “The letter is a distraction.”
Merger and acquisition advisory fees usually range from 1 percent to 5 percent of the total transaction cost, two people with knowledge of such deals said, declining to be identified because they weren’t authorized to talk to the media.
Cayman Islands-incorporated AXAM Investments Ltd., which received $670 million of the payments, was removed from the local company registry in June 2010 for non-payment of license fees, three months after receiving its final fees from Olympus, according to the report.
The FBI is investigating payments by Olympus to advisers on a 2008 acquisition, said a person familiar with the probe who declined to be identified because the matter isn’t public.
Share Slump
Shares of Olympus, also the world’s biggest maker of endoscopes, have slumped more than 50 percent since Woodford was fired, wiping about $4.6 billion from the Tokyo-based company’s market value.
The stock rose 7 percent to 1,176 yen as of 1:50 p.m. in Tokyo today after brokers were told limits may be imposed on the number of shares available for trading through margin accounts. The request could discourage investors using borrowed shares to sell Olympus, reducing downward pressure on the price, according to Fumiyuki Nakanishi, a strategist at Tokyo-based SMBC Friend Securities Co.
The Olympus statement accused Woodford of “autocratic behavior,” repeatedly rescheduling board meetings and using a private jet while demanding “severe cost cutting efforts.”
“Woodford was selected with the expectation that he would carry out things that Japanese would find difficult to do,” according to the internal statement. He “began to behave with no regard for organizational hierarchies and chains of command. He would issue orders to his own people, disregarding the presidents of company operations.”
‘Avoiding Tokyo’
Woodford “spent less than 40 percent of his time in Japan, avoiding Tokyo,” the statement said. “A continuation of this state of affairs would have imposed a tremendous burden on stakeholders, meaning that no time could be spared” in relieving him of his duties, the statement said.
The letter “contains lies,” Woodford said. “It’s nonsense.”
Olympus conducted a previous, internal probe into the acquisition of medical-equipment maker Gyrus that concluded it was “not able to discover any illegal or unjust points” in the fees, according to a 2009 copy of the report obtained by Bloomberg News.
The investigation, which was conducted by an attorney, an accountant and a professor, was published before Olympus paid $620 million to AXAM to repurchase preferred shares that formed part of the advisory fee.
Nippon Life Insurance Co., Olympus’s largest shareholder, Southeastern Asset Management Inc., the No. 3, and Harris Associates LP have sought more information from the company and urged it to respond to the allegations Woodford made.
To contact the reporters on this story: Chris Cooper in Tokyo at ccooper1@bloomberg.net; Takashi Amano in Tokyo at tamano6@bloomberg.net
To contact the editor responsible for this story: Peter Langan at plangan@bloomberg.net
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