Olympus seeking cash injection from Sony or Panasonic

May 30, 2012

After narrowing its list of suitors for a capital tie-up, scandal-hit Olympus Corp. is now in negotiations with Sony Corp. and Panasonic Corp., sources said.

According to the sources, the distressed optical equipment maker is seeking an investment of tens of billions of yen. Ten billion yen is worth around $126 million at today’s exchange rates. The sources said Olympus will likely pick one of the two electronics giants to partner with at the end of June.

“There is no option to reject outside capital,” the sources quoted a top Olympus official as saying.

In compiling a business plan, Olympus has found that its capital adequacy ratio in three years would be substantially lower than those of other companies in the same sector. This has spurred Olympus to seek an injection of funds as well as to streamline operations.

The company that invests in Olympus is likely to take a stake of more than 10 percent in the troubled company, in all likelihood becoming its largest shareholder.

The business plan for the five years through fiscal 2016 is likely to be announced by Olympus President Hiroyuki Sasa on June 8.

Under the plan, the firm will cut roughly 2,500 workers from its 34,000-employee workforce. Also, the company will aim to boost sales to 1.1 trillion yen, 30 percent more than in fiscal 2011, mainly through making its digital camera operations profitable and expanding its endoscope business.

But Olympus’ capital adequacy ratio dropped to 4.6 percent at the end of March this year after corrections in its accounts due to a bitter loss-hiding scandal.

The company expects this capital adequacy ratio will remain at a relatively low level. The figure at the end of March 2015 is projected to be 16 to 20 percent, representing a wide gap with other companies. Fujifilm Holdings Corp., for example, is currently at 62.85 percent.

There is strong opposition to a capital tie-up within Olympus, and Sasa had been taking a cautious approach.

Many Olympus shareholders are seeking damages over the cover-up scandal, and the company needs large amounts of funds to expand its endoscope business and to take other steps.

Facing these challenges, the company reached the decision to seek outside investment, the sources said.

(This article was written by Aki Fukuyama and Takashi Kamiguri.)

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Olympus' capsule endoscope (Provided by Olympus Corp.)

Olympus' capsule endoscope (Provided by Olympus Corp.)

  • Olympus' capsule endoscope (Provided by Olympus Corp.)

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