Terumo Proposes Merger With Olympus
07/25/2012| 09:26pm US/Eastern
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--Terumo proposes Y50 billion investment and merger with Olympus
--Proposes joint holding company under which two firms will remain separate
--Olympus says hasn't decided yet
--Person familiar with Olympus's thinking says Sony remains frontrunner
TOKYO--Japanese medical-equipment maker Terumo Corp. (>> Terumo) said Thursday that it has proposed a merger with Olympus Corp. (>> Olympus Corp) in an apparent bid to counter Sony Corp.'s (>> Sony Corporation) leading position among a group of bidders for a stake in the scandal-hit camera maker.
Olympus, also known for its medical-imaging equipment, has said it is looking for a partner to invest about 50 billion yen (around $649 million) to shore up its finances after a $1.5 billion accounting scandal uncovered last year weakened its balance sheet.
People familiar with the matter earlier said Sony is the front-runner among the group of bidders, which also includes Panasonic Corp. (>> Panasonic Corp), and Fujifilm Holdings Corp. (>> Fuji Film Holdings). A person familiar with Olympus's thinking said Thursday that Sony remains the favored candidate, adding that Terumo's proposal may help Olympus to negotiate better conditions with Sony.
"The company proposed investing about Y50 billion in Olympus and forming a committee to establish a joint holding company in the future," Terumo said in a statement.
While details of the holding company have not been worked out in the proposal that was recently submitted, a Terumo spokesman said both firms would remain separate under the structure. Terumo said it has not reached any agreement with Olympus.
"We have received capital alliance proposals from several companies including Terumo. But we are still in the stage of carefully studying" these offers, Olympus said in a statement. The company also said it has not made a specific decision yet.
Terumo, which makes blood-transfusion systems, already holds a 2.1% stake in Olympus, and the companies have an alliance in research and development of medical devices and materials.
A merger would allow the two companies to gain a global competitive edge in the field of minimally invasive treatment, Terumo said. The merger between 12th-ranked Terumo and 13th-ranked Olympus would also bring them closer to the world's top five in terms of sales of medical equipment excluding imaging companies, according to data provided by Terumo.
At a news conference in June, Olympus President Hiroyuki Sasa said the company is considering various possibilities, including synergies with its struggling camera business as well as its more profitable medical business.
"It's a long-shot" for Terumo, the person familiar with Olympus's thinking said. "There is not much intrinsic merit in combining the two businesses," the person said, adding that Olympus's endoscope business is more profitable than Terumo's medical device business.
Olympus's 70% share in the market for endoscopes remains strong--making the company an attractive tie-up prospect for consumer electronics makers looking for new growth opportunities in the health care sector.
For Sony, an alliance with Olympus would strengthen ties with a key customer for its optical sensors and aid its efforts to build its medical business.
A person familiar with Sony's thinking said an investment in Olympus remains appealing in light of the opportunity to incorporate other Sony components into Olympus's medical products and the potential use of Olympus's sales channels.
Still, it would be a big investment for Sony given its current financial standing, the person added, saying it's not a deal that Sony would pursue "without conditions."
Daisuke Wakabayashi contributed to this article.
Write to Kana Inagaki at kana.inagaki@dowjones.com
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