Olympus Shares Fall on Plan to Sell $1.2 Billion of Stock

Olympus Corp. (7733) (7733), the world’s biggest maker of endoscopes, fell to the lowest level in eight weeks in Tokyo trading after saying it plans to sell as much as 118 billion yen ($1.2 billion) of shares overseas.

Olympus dropped 5.4 percent to 2,928 yen as of the close, the lowest since May 15. As many as 41 million shares, amounting to 12 percent of the stock outstanding after the sale, will be offered in markets including the U.S. and Europe, Olympus said yesterday.

The company plans to use almost half the money raised for research and development at its main medical unit, with the remaining proceeds for general spending and debt payment. Tokyo-based Olympus, which received a 50 billion-yen investment from Sony Corp. (6758) (6758), needs funds to expand a unit that contributes half of revenue, after the disclosure of a 13-year accounting fraud wiped $1.3 billion off its balance sheet.

“It looks like the cash will be spent on Olympus’s earlier announced business plan and not something new,” said Yu Yoshida, an analyst at Credit Suisse Group AG in Tokyo with a neutral rating on the stock. “I’d thought the company would be able to carry out the plan without needing more external funding.”

Sony’s investment, announced in September, helped Olympus improve its ratio of equity to total assets to 15.5 percent as of March 31 from 2.2 percent in June last year.

The stock will be priced as early as July 18, Olympus said. The estimated amount to be raised was calculated based on the stock’s July 4 closing price of 3,120 yen a share, according to a separate filing to the finance ministry yesterday.

Accounting Fraud

Imaging, including digital cameras and recorders, accounted for about 14 percent of sales last year, according to data compiled by Bloomberg.

Today’s decline pared the stock’s gain this year to 74 percent. The price remains above the level it was in early October 2011, before former Chief Executive Officer Michael Woodford uncovered the accounting discrepancies and went public with them after the Olympus board declined to take action.

The company will sell 32 million new shares, 4 million shares it owns and grant underwriters an option to offer an additional 5 million shares.

“We received several proposals that there’s high demand from institutional investors overseas,” Sam Kobayashi, a spokesman for Olympus in Tokyo, said by telephone yesterday.

Olympus plans to spend 54 billion yen on research at the medical unit, 24 billion yen on promoting new medical products and 19.7 billion yen on boosting capacity at existing factories in Japan, and may use the remaining funds to pay debt, it said.

The company hired UBS AG (UBSN), Morgan Stanley (MS) and SMBC Nikko Capital Markets Ltd. as underwriters for the offering.

Reports of attempts to hide the losses triggered an 81 percent plunge in Olympus stock from Oct. 13 to Nov. 11, 2011.

The company and three former executives, including then Chairman Tsuyoshi Kikukawa, eventually admitted using fraudulent takeover deals to hide losses for 13 years starting in the 1990s. Olympus was ordered to pay 700 million yen in fines while the three officials received suspended sentences from the Tokyo District Court last week.

To contact the reporters on this story: Kanoko Matsuyama in Tokyo at kmatsuyama2@bloomberg.net; Takashi Amano in Tokyo at tamano6@bloomberg.net

To contact the editor responsible for this story: Jason Gale at j.gale@bloomberg.net

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