TPG willing to invest US$1b in Olympus joint deal
TOKYO: Private equity firm TPG Capital is willing to invest about US$1bil in Japan’s Olympus Corp in a joint deal with Sony Corp or another suitor circling the scandal-hit firm, a person familiar with TPG’s thinking said.
TPG had informed executives at Sony, Canon Inc, Fujifilm Holdings and Panasonic Corp of its interest in providing capital and expertise to help revive the maker of medical equipment and cameras, the person said.
Olympus has been seeking a friendly investor to make a minority investment and help revive its business after a US$1.7bil accounting scandal erupted in October, crushing its stock price and putting a big dent in its balance sheet.
Electronics firms such as Sony, Canon and Panasonic were keen on Olympus’ diagnostic-endoscope business as part of their strategies to expand into healthcare, while Fujifilm was already in the profitable endoscope market, banking sources have said.
So far, TPG had not received any indication from these strategic suitors that they would be willing to work with the private equity firm on a transaction, the person said, speaking on condition of anonymity due to the sensitivity of the matter.
But TPG believed that it could be an effective partner by putting up capital, offering its experience in management, restructuring and the healthcare field, and by taking over parts of the firm the strategic investor did not want, the person said.
A TPG spokesman declined to comment.
The list of potential suitors is long and was thought to include Samsung Electronics, though the South Korean technology giant ruled out yesterday any chance of an equity investment in the firm.Sony, Canon, Fujifilm and Panasonic are seen as strong candidates to invest in and form an alliance with Olympus, attracted by its medical equipment business, the company’s crown jewel boasting operating profit margins of about 20%.
Nearly all of Olympus’ profits are generated from its dominant 70% share of the global market for flexible diagnostic endoscopes. The steady cashflow from that business has allowed it to prop up its digital camera businesses, which is on course to lose money for a second straight year.
TPG would consider taking over the other less desirable parts of the firm to facilitate the deal. This could include the digital camera operations, which is in need of a major overhaul, including job cuts, the person said.
TPG is one of the world‘s largest private equity firms with about US$48bil of assets under management.
Any major foreign investment in Olympus could run into opposition in Japan, where the firm’s endoscope technology is seen as strategic, in part because of the country’s high incidence of stomach cancer.
Medical endoscopes are used to peer inside patients to help diagnose cancer, ulcers and other conditions. Olympus’ endoscope technology also has strategic industrial applications, such as looking inside dangerously radioactive parts of Japan’s crippled Fukishima nuclear power plant.
The Japanese government can halt an investment of 10% or more in a listed firm, or 1% or more in an unlisted company, if foreign ownership would affect national security, a regulation some say might be applied to optical technology.
Olympus remains a thorny takeover target for potential bidders because the multinational remains under investigation by police, prosecutors and regulators at home as well as by law enforcement agencies in the United States and Britain. – Reuters
