an activist investor takes a board seat they are always looking to shake things up at the company. They now have a direct vote in how the company is run. Now one board member is not going to override all the others if the others are all of a like mind, but they are going to be in there arguing for major changes.
I do not know how big a stake ValueAct has in Oly, but assuming it is large, Oly has to listen to them to a certain extent. If VA decides that Oly cannot change in they way they want, they will dump the stock and that is going to depress the stock price and also frighten off other potential investors. So, the bottom line is Oly has to listen to these people.
Olympus is a company that has been in financial trouble for a long time. Sony has stepped in to save them once. It was probably a good deal for both as Sony surely acquired technology it could use nd Oly got a lifeline for while. This time the investor (VA) is not going to be interested in IP other in that it could possibly be sold. They want the company to become profitable and to grow those profits. Anything that does not contribute to that is going to be sold or closed.
There are many different ways that VA could push for Oly to attain and increase profitability. Selling or closing divisions is certainly one of them. Quite frankly I don't think Oly could be sold as they have little that would interest other camera companies. The only viable buyers are Canon and Sony, and Sony has already been in and got what they want and Canon would rather just sink Oly than buy it. Also selling a company or division of one in a rapidly shrinking market is just not going to go well.
Before people yell that their endoscopy division needs the camera division, remember they just need some of its tech. The camera division does not needot actually be making cameras and lenses for the public. Actually reducing the camera division to one that just produces the technology needed for the other parts of the compoany makes a lot of business sense. This could result in large operating cost reduction and this is high on the list of things that ativist investors like to accomplish.
So there is probably no way to know if this rumor is true, but one can easily make some very reasonable assumptions and get to the same place.
Or not.
Of the major camera makers, the two corporations with the best trends in the stock market are Fujifilm and Olympus. Both have gone through a 'valley of death' in the last 10 years. Oly came out stronger financials, more focus, and strategies in all major business units. Sony may have saved the day with a strategic investment.
Of the many hedge fund investors, ValueAct invests in large companies ($3 Billion or more) with record with Rolls-Royce, Citigroup, Microsoft, Horizon Discovery, and others. They are a value investor, meaning they look for companies they think are undervalued or capable of doing more with stronger management.
Olympus is ValueAct's first investment in Japan. To quote "We believe Olympus is one of the world’s best medical device companies with a culture of innovation, close relationships with health care practitioners, and an exceptional presence in emerging markets,” ValueAct said. “We see exciting potential for step function earnings growth at the company through efficiency initiatives and sales growth.”
It's too early to interpret what this means for Oly's small imaging division. The word "efficiency" might shake up some folks. But if you've read the book by Michael Woodford (the UK born CEO who shook things up so much in 2011-12), there's plenty of room to find efficiencies in the medical business, too.
This could be the best of times, or the worst of times, for the imaging division. It's not unreasonable to assume the closure might be an option. On the other hand, I haven't seen that in VA's track record, and Oly repeatedly made the case for the R&D benefits. So I think the only conclusion for right now is wait and see. There are bigger issues for VA to deal with in this investment.
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Jeff
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