Analysis: Swift takeover for Olympus unlikely

Mon Jan 16, 2012 2:42pm EST
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By Isabel Reynolds

TOKYO (Reuters) - Olympus Corp should be the easiest of takeover targets: a profitable business with its share price in tatters, its management in utter disgrace and its balance sheet in need of fresh capital. But not in Japan.

The long-term approach of major Japanese investors like banks and life insurers, combined with an aversion to foreign and hostile takeovers and uncertainty over lawsuits stemming from the $1.7 billion accounting scandal, will likely make any change of ownership at Olympus a gradual process.

The camera and endoscope maker is seeking a friendly capital tie-up with a rival electronics company such as Sony Corp or Fujifilm to bolster its finances after unpicking the 13-year accounting fraud to find its net assets had dwindled to just 45.9 billion yen.

Olympus is expected to stay listed for the time being and sources with the company's powerful main bankers, who are also shareholders, say they would be prepared to wait for the firm to recover on its own.

The tie-up proposal is meant to mollify more impatient foreign investors, say the bankers, who avoid commenting in public because of the sensitivity of the issue.

"This is a distinctively Japanese thing," said Alastair Macdonald, banking analyst at Macquarie Capital Securities in Tokyo. "For decades, Japanese banks have formed very long-term relationships with their corporate customers. I think by and large the mindset has been to stick with those customers through thick and thin."

That means inviting in an outside investor is not likely a bid by banks to lift the share price and head for the exit.

"The banks do have some equity exposure to Olympus, but it's not material relative to their own capital. They do have rather higher loan exposure, and rushing to dump their shareholdings would not be consistent with maintaining a long-term relationship with the company," Macdonald added.   Continued...