Right Back to the Bad Old Days for Olympus?

It's the eternal problem with takeovers: who takes over? And, as George Orwell so tellingly observed in his tale about the pigs (his famous critique of Stalinism), what if the new regime becomes as bad as the old...or worse?

It's a problem Egypt is struggling with right now. Mubarak is gone; long live...?

Here's an article that synopsizes succinctly what some of Olympus's non-Japanese investors fear might be happening with the "clean sweep" of the Olympus board of directors slated to happen in April. They're worried it won't be so clean. Large Japanese banks, wielding power as both creditors and investors, are allegedly trying to stack the board with officers loyal to them. "As far as we're concerned, the Olympus board would then be de-facto creditor-controlled," the principal of Southeastern Asset Management, one of the two largest non-Japanese shareholders of Olympus, told Reuters.

I just found this curious because it's exactly what Greece is worried about, if you've been following that crisis—that it's going to lose its autonomy and become creditor-controlled.

So far, Olympus's camera division is steaming along happily just as if the financial scandal and leadership crisis wasn't happening. But a creditor takeover would make its future even more vulnerable than it already is.

(Makes me more eager to eventually get an E-M5. I'm all about enjoying good things while you still can.)

Michael Woodford, the fired whistleblower CEO who had to give up his bid for a triumphal return when it became clear the big Japanese banks wouldn't support it, told Reuters, "if it is true...then we are going back to the bad old days."

Back to the bad old days. Same old same old. Sweep out the bad...and, possibly, make way for the worse.

Mike

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Original contents copyright 2012 by Michael C. Johnston and/or the bylined author. All Rights Reserved.

Comments

[m3photo]

'I just found this curious because it's exactly what Greece is worried about, if you've been following that crisis—that it's going to lose its autonomy and become creditor-controlled.'

If only it were just Greece - Spain's new minister of moneys = ex-Lehman Bros., Italy's new (unvoted) PM = ex-Goldman Sachs, Greece's new shoehorned version = ex-banker; see where this is going?

I guess (so it's not completely OT) they've none of 'em got even a miserable point and shoot either ...

[David Bennett]

Apropos Greece, the problem with the Eurozone arose precisely because the countries that signed up to it refused to agree to being overseen by a unified body with teeth that could tell them when to be more prudent.

The Eurozone is a partnership, and each country was supposed to be prudent enough not to spend its budget on frivolous things to the endangerment of all.

I could liken it to a partnership where one of the partners went on a spending spree buying new curtains and carpets rather than stock.

So I don't think the analogy with Olympus works, although it may be bad for Olympus to be told to make what a financier believes the market wants.

[Dennis Allshouse]

"Meet the new boss, same as the old boss."
The Who.

[Manuel]

Mike, Greece has already lost its autonomy, if not its sovereignty. A bailout has been approved yesterday: Greece will get the money it needs, but the European Union, the European Central Bank and the IMF (AKA the Troika) will control Greece's budget and the bailout plan's execution. Greek people's worries were not unfounded after all.
In what concerns Olympus, you're right when you point that the company will probably be ruled de facto by its creditors, and they will all want their slice of the cake. What's worse, they won't be sensitive to Olympus cameras' glorious past, Zuiko lenses' reputation or the E-M5's image quality. If Olympus Imaging Co. doesn't make a profit, they'll drop it. It's that simple.

[Bernie]

"Here comes the new boss
Same as the old boss"

The Who "We don't get fooled again"

Bernie

[Jayson]

You missed a good reference there Mike: "Meet the new boss, same as the old boss."

[Steve Jacob]

Poor Oly! Still, there is always hope - creditors will sell off a loss making division and the camera engineers and designers may find a more friendly home.

Worked for Pentax - eventually - and arguably for Minolta's camera division as well. In fact, Nikon and Canon are the only "intact" ones of the big five Japanese makers left - or will be if Oly is sold off.

But nervous times for sure.

[Nigel Voak]

"Se vogliamo che tutto rimanga come è, bisogna che tutto cambi".

“If we want things to stay as they are, things will have to change”

― Giuseppe Tomasi di Lampedusa, The Leopard

[Ed Hawco]

Regardless of who's sitting on the board, I wish they would hire some new marketing people who know how to name products. "OM-D E-M5?" "PEN E-PL1?" "PEN E-PM1?" Really? That's the best you can do?

It doesn't matter if there's some internal logic, from the consumer's point of view it looks like random pickings from a Scrabble board.

Panasonic is just as bad, at least with its compact line.

[Janne]

"Large Japanese banks, weilding power as both creditors and investors, are allegedly trying to stack the board with officers loyal to them."

Um, would not another way to say the exact thing be "The company owners want to appoint board members to represent them, not peopl without the same large stake in the company"?

What, exactly, is wrong with that? After all, if somebody is so worried the owners want to control the company they own, all they have to do is buy up enough shares and/or debt that they can have their own say on the board makeup.

[Speed]

Mike wrote, " ... [Greece is} going to lose its autonomy and become creditor-controlled."

Greece has lost it autonomy.

Papademos's elevation to power ends 10 days of political turmoil in Athens triggered by Papandreou's unilateral announcement that he would put the controversial bailout package to public vote.

Following international outrage and a public dressing-down by Angela Merkel of Germany and Nicolas Sarkozy of France, Papandreou backed down on the referendum last Thursday but not without having incurred immense damage to his standing at home and abroad. He resigned on Wednesday.
http://www.guardian.co.uk/world/2011/nov/10/lucas-papademos-greece-interim-coalition

A coup d'état de creditor.

[Mike Johnston]

Janne,
I'm not an expert, either on this situation or on business and finance in general, but I believe the objection is that a) there are other shareholders with conflicting interests who might be at a disadvantage because they happen not to be Japanese, and b) the stated aim is to restore public and shareholder trust in the leadership of the company by appointing independent directors. The problem when existing creditors grab control of a company is that the decisions then tend to be made not in the interest of the health of the company, but in the interest of making said creditors whole to the exclusion of other imperatives.

Mike

[Richard K]

Quote: So far, Olympus's camera division is steaming along happily just as if the financial scandal and leadership crisis wasn't happening

But represents only 16% of the business and is running at a loss, from what I've heard.

Doesn't sound encouraging, whoever is running the show.

[Markku]

And for Greece, what is (or was) the alternative? Maybe Papandreou was right,they should have taken the public vote and then live with the consequeces, whatever they might have been...now we are salvaging Greece no matter what. And still,the very idea of EU cannot be lost in somethig so stupid and mundane as this mess is and has been.
For Olympus,godspeed.

[PWL]

God, you're harshing my mellow....

As a Zuikoholic (and future EM-5 user), I keep rooting for the Olympus camera division. But it sounds like things may go from bad to bad, with the same slimy types who got the company into this mess in the first place descending on it like vultures. Another reason to hate bankers, I guess....

I realize nothing lasts forever. But it is disheartening to realize that something really good might very likely be ruined by bean-counter types in the near future...

[Rob]

For some reason, creditors always sit atop the financial food chain. Workers sit at the bottom. No doubt, there will severe austerity measures imposed upon Olympus, just as there will be upon Greece. The workers of Oly and the citizens of Greece will respectively bear the greatest burdens, as they always do, even though the problems were created by others far above them.

[John Banister]

From what I've read, as a consumer of Olympus products, I'm pretty happy about this aspect of the fraud story. I have the impression that Japanese banks take a much longer term view than do many other investors regarding turn-around on the investment (hence the loud sounds of disappointment from the others), and if they're already the major share holders, those banks will want Olympus to look good, because if Olympus doesn't, that reflects poorly on their decision to become the major share holders in the first place. I think frightening news would be news of "strategic partnership." Should the name get diluted, I think the motivation to defend it would be less.

[Murph]

Mike:

Part of why Woodford could not come back is peculiarly Japanese. The sense of "Face", he embarrassed them, and even though he is right, he pointed out the problem. They will move in someone else who is in the 60's or 70's from one of the holding banks. I lived in Japan for a number of years, and have seen this before. Woodford caused Olympus and the Japanese to lose "face" in front of the world