Thursday, October 27, 2011

Kikukawa Quits - Olympus soars (but why?) or Covering Up The Cover-up

Farewell then, Kikukawa. Bloomberg reported his departure today. Does it change anything at all? Has the uncertainty gone? No. Amongst other things, in his parting statement he said

“I apologize for causing concerns due to the share decline triggered by the replacement of the previous president,” “There is no corruption” [in past acquisitions]....

His choice of words  is precise and no accident. Like Tarantino in his own Pulp Fiction's "Bonnie Situation", one has to laugh at Kikukawa. In the Bonnie Situation, Tarantino is upset NOT because Travolta and Jackson have brought a dead body to his house, but because his wife will be home soon and mind find out. Kikukawa, was NOT apologizing for anything apart from the disrepute to the company and fall in the share price. To his credit, there likely was NOT (in Clinton-esque truthiness) corruption in the scrutinized acquisitions. They were likely made in good faith and at toughly negotiated prices. The actual advisors (who conducted the M&A work) were probably paid appropriately and thus the actual advisors received nowhere near the amounts claimed, and a follow-up of the money-trail would likely confirm this. No funds were criminally siphoned to Switzerland (or Cyprus or Malta) to pay Yakuza or to prevent blackmail in one form or another, nor did they find their way to Hawaii  to fund villas for the board. I just wish to reiterate, one more time, I think this is really about hiding and disposing two-decade-old Zaitech losses, which have been cloaked and/or re-punted in hope of repair, but due to market evolutions, remain financially gangrenous. Embedding these still-unrepaired losses into "advisors fees" were seemingly (at the time, when not under scrutiny) a plausible way to try to finally put them behind the company without having to lose face over their origin, or the subsequent bumbled face-saving attempts to hide them. Kikukawa may have architected, or merely approved this final ill-fated stab at exorcising them, but I think when revealed it will be that he was, more importantly, running protection to cover up the covering-up of mistakes made long-ago. Kikukawa's fault (apart from the cultural baggage preventing him from coming clean) was the arrogance to assume Woodford would let the proverbial sleeping dogs lie when told to not to worry about it. Woodford's sacking was due to the honorable mistake of not going "All-in" with Kikukawa and his Board of Subs (sic?). He probably didn't know (if I am right) of the losses origin, for at the time, he was a likely an endoscope salesman.  I do wonder however, what Woodford would have done if Kikukawa had taken him in confidence and revealed all history, explaining the reasons for historical subterfuge. Would he have reluctantly supported the somewhat better inentions of the Board of Subs?

Coming clean, where a cover-up of the cover-up has been made, is an all or nothing affair. Of course, if I am right, historical accounts will have be restated, though since these will be one-time charges, far back in time, they should have no bearing on the present operations, thus lifting of uncertainty thus allowing  the business - once again - be valued on the basis of a world-class high-margin medical instruments company with a rather significant though problematic legacy camera unit. Now, back to Greece's haircut.. 

PS - The Bonnie Situation clip above really is apt for the description of Olympus' situation, and should be watched if only to start the day with a laugh....

5 comments:

MuyouAn said...

Having arranged a number of "rescue bonds" for our clients in the 1990's myself, I think you are spot-on as to the real reasons for these inexplicable "M and A". My guess as to the reason for people still buying shares in what can charitably called a glaringly governance-challenged company is that at this level they are expecting a TOB, although not many people mention this. After all, their core business still seems sound and interesting. Once you take control of the company, delist it and fire the entire board, clean up its governance, and refloat it, I think there is some serious money to be made. I'd be very surprised if no-one is timing their pounce, as it were.

vbounded said...
This comment has been removed by the author.
Durf said...

Looks like it was a good call. Love the "has discovered" verb in there.

http://www.reuters.com/article/2011/11/08/us-olympus-idUSTRE7A702X20111108

RCJ said...

great call
so what else does the future hold ?

Anonymous said...

Great call here. Scooped all other media by well over a week.