Sony sold 5% $760 million Olympus stake

Started Aug 30, 2019 | Discussions thread
thorkilry Contributing Member • Posts: 881
Re: This is about Sony, not Olympus

Jeff wrote:

Olympus is buying back a 5% ownership stake from Sony. Sony will realize a nice profit from the transaction because the stock value has gone up since the original purchase.

The original Sony purchase amounted to equity financing at a time when Olympus had considerable debt load, was under scrutiny for an accounting scandal, short sellers were taking large positions in their stocks, and minority shareholders were demanding seats on the board and new leadership. Sony's investment helped on all these fronts by lowering the cost of capital and stabilizing leadership in the company.

Since then Olympus has paid off significant long-term debt. This buyback from Sony continues that pattern by reducing the cost of equity financing. Olympus is generating enough free cash to pull off the transaction, which is a good sign for the company.

But the real reason for this transaction is on the Sony side. They have an activist investor, Dan Loeb, whose hedge fund, Third Point, would like Sony to divest of non-core assets, including semiconductor operations, to become a media and entertainment conglomerate. He argues that Sony's complex array of businesses reduces the value, so streamlining the company to focus on media and entertainment would provide a return to current shareholders. See here for more:

In short, this transaction is about Sony, not Olympus.

The good news for Olympus is that they are doing well enough to pull off their end of the transaction. This may somewhat change the nature of Olympus's financing, but not going to change what happens in the imaging division that we care about on this forum.

Thank You jeff, I remember your great info, back in "trouble times"  A new board saved Olympus Imagine division, and Iam glad they did it.

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