Olympus acquisitions central to claims

When Olympus, the Japanese manufacturer of cameras and endoscopes, went looking for its next big business venture five years ago, it found candidates in three areas far from its core business: medical-waste disposal, microwave cookware and mail order cosmetics.

According to Michael Woodford, the Briton sacked on Friday after just six months as Olympus’ president, Olympus spent more than Y70bn ($912m) between 2006 and 2008 to build controlling stakes in a trio of small, little-known companies operating in these disparate fields.

Mr Woodford claims the companies had little real value and that their ultimate owners were never identified by Olympus during the transactions.

His assertions are central to an apparent dispute between Mr Woodford and other members of Olympus’ board. Mr Woodford says he was dismissed for calling into question some $1.3bn of payments to advisers and investment funds in a string of acquisitions carried out under his predecessor, Tsuyoshi Kikukawa.

In letters to Mr Kikukawa shown to the Financial Times, Mr Woodford urged him and two other directors to resign. Mr Woodford has stressed that he has seen no evidence that Olympus executives benefited personally from the acquisitions, claiming instead “a catalogue of calamitous errors and exceptionally poor judgement” that resulted in inflated pay-outs to others and a sizeable loss of shareholder value.

Olympus says it dismissed Mr Woodford over problems with his management style. The company declined repeated requests for interviews on Monday, and previously said it had “disclosed everything we are required to disclose”. Its shares plunged 24 per cent on Monday, compounding an 18 per cent decline on Friday.

Among the deals Mr Woodford says he was probing were the acquisition of three unlisted Japanese companies between 2006 and 2008: Altis, a specialist in disposing of plastic medical waste; Humalabo, a mail order retailer of cosmetics and health supplements made from mushroom extract; and News Chef, a maker of microwaveable cookware.

A year after the acquisitions were completed, in May 2009, Olympus wrote down the value of the companies by between 68 and 83 per cent, according to Mr Woodford and documents shown to the FT.

Revenue and profit projections appear to have been highly optimistic: in the case of Altis, for instance, sales were projected to grow 700-fold between 2006 and 2013. Olympus does not disclose Altis’ actual financial performance in its accounts, and declined requests for comment.

The people behind the companies were never identified by Olympus, according to Mr Woodford. Company records list their shareholders only as a group of special-purpose investment vehicles (SPVs). Although the three companies’ businesses were wildly different, one SPV owned shares in all three companies, while two others had stakes in two of them – connections that Mr Woodford said should have raised concerns.

All three deals were conducted through the same investment fund, Global Company, which the documents show had received funds from Olympus beginning in 2000. It acted as an acquisition arm of the company and was managed by an outside fund manager.

Mr Woodford said Olympus left due diligence and negotiations to Global Company, and the documents show it did not bring in other financial advisers to assess the sale price or other aspects of the deals.

Attempts by the FT to locate and contact Global Company and its representatives failed. Altis and Humalabo did not answer calls seeking comment. An employee of Global Chef, a company listed as the trading arm of News Chef, said he was not authorised to speak and could not connect the FT with company executives.