Olympus admits it paid huge adviser fees

City A.M. Reporter
Japan's Olympus has admitted that it paid $687m (£436m) to deal advisers, confirming claims made by its sacked chief executive and reversing an earlier denial in a deepening scandal that has wiped out almost half its market value.

The camera maker earlier this week said it paid advisers a fee of some 30 billion yen (£248m) for a $2bn takeover of British medical equipment maker Gyrus in 2008.

In a statement, Olympus now acknowledges that the total payment was much higher when a buyback of preference shares was included. Its shares have fallen another 4.8 per cent today.

Olympus confirmed the main allegation of its ex-chief executive turned whistleblower Michael Woodford, who says he was sacked after querying the payment. He was dismissed just two weeks into the job.

But Olympus refused to name the advisers and said it did not know their whereabouts. It had hired them to work on the Gyrus deal.

"The fee that Olympus paid for Gyrus is outrageously high," said a senior investment banker in Japan, his comments reflecting widespread disbelief over a scandal that has put corporate Japan under the microscope. The banker asked not be identified due to the sensitivity of the issue.

The payment, equal to a third of the acquisition price, is stratospheric compared with an industry standard of one to two per cent of a deal's value.

The manner in which it was paid has also shocked industry professionals.

Olympus has denied any wrongdoing, while Japanese regulators have made no comment on the issue.

The Financial Services Agency declined to comment, and the Tokyo Stock Exchange has also made no suggestion of opening an investigation.

Woodford says his sacking last week was orchestrated by chairman Tsuyoshi Kikukawa for suggesting the chairman stand down over the payment, which exceeds the firm's expected operating profit this business year.

Woodford has also said he approached UK financial fraud investigators to probe the payment, most of which was made from the Japanese firm's subsidiary in the UK.

Olympus said on Wednesday the payment included $620m to buy back preference shares in Gyrus from its advisor in March 2010, or nearly quadruple the price at which Olympus issued them 18 months earlier in exchange for share options issued as part of the fees.