(The author is a Reuters Breakingviews columnist. The
opinions expressed are her own)
By Una Galani
HONG KONG, July 12 (Reuters Breakingviews) - Without a zoom
lens, it’s hard to see the logic in Olympus’ (7733.T) $1.2
billion share sale. Less than two years after a huge accounting
fraud, the Japanese company is tapping capital markets. But the
camera and medical equipment maker’s decision to sell shares
only outside of Japan is a poor way to thank local shareholders
who endured the dark days. Besides Olympus’ finances were
already on the right track.
Since ex-chief executive Michael Woodford first questioned
Olympus’ accounting, the company has made remarkable progress.
After a management overhaul, asset disposals, and a capital
infusion from Sony (6758.T), Olympus registered positive
earnings in the full year that ended in March; its shares are
one quarter above their pre-scandal level. The new cash will
expand its fast-growing medical business and help pay down debt.
Yet Olympus doesn’t have any urgent need for cash. While its
net debt is still high at around five times EBITDA for the year
ending March 2013, according to Eikon, the amount due within a
year was only equivalent to 60 percent of the company’s cash
pile. That would leave almost $900 million that Olympus can draw
on before it has to turn to shareholders. The share offer will
take Olympus’ equity from 16 percent of its total assets to over
28 percent. But at the current rate, Olympus would have got
there eventually anyway without selling new shares.
Then there’s the potential dilution. Japanese investors
can’t buy the new shares locally - perhaps because Olympus
senses foreign investors are keen to buy into Japan’s recovery.
That may dilute their holdings by 8 percent, though the eventual
effect will become clear when the price is set, sometime around
July 18. Determined local institutions may be able to
participate through offshore entities but non-financial and
retail investors will find it hard to do so.
The people who will most welcome Olympus’ cash call are
likely to be its lending banks. They also rank amongst its top
shareholders – and the former executive of one big lender is
chairman of the board. But given the lack of urgency, it’s hard
to see other investors being as snap happy.
SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS:
- Japan’s Olympus Corp said on July 8 that it will raise up
to 118 billion yen ($1.17 billion) in an offering of new shares.
- Olympus will offer 32 million new shares and 4 million
existing treasury shares. An additional 5 million shares may be
sold in an overallotment. The number of shares outstanding as of
July 11 was 306 million, according to Eikon data.
- The stock will be priced as early as July 18. The
estimated amount to be raised was calculated based on the
closing price on July 4 of 3,120 yen a share, according to a
filing to the ministry of finance.
- The shares will be offered and sold in offshore
transactions to institutional buyers, mainly in the United
States and Europe.
- On July 3, the Tokyo District Court found three former
executives of Olympus guilty of covering up the firm’s massive
investment losses and handed them suspended prison terms.
- Shares in Olympus are trading around one quarter above
where they were in October 2011 before the financial scandal
came to light.
- The company’s shares had fallen almost 1 percent since
Olympus announced its plan to raise capital, and closed at 3,065
yen on July 11.
- Olympus will sell the shares through SMBC Nikko Capital
Markets, UBS, and Morgan Stanley.
- Reuters: Olympus hits one-month low, plans up to $1.17
billion in share issue [ID:nT9N0BQ02C]
- Olympus press release here
- For previous columns by the author, Reuters customers can
click on [GALANI/]
(Editing by John Foley and Katrina Hamlin)
Keywords: BREAKINGVIEWS OLYMPUS RAISING
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