Sony Corp, Japan’s largest consumer-electronics exporter, will invest ￥50 billion (US$645 million) in Olympus Corp as part of its strategy to move into the medical equipment business.
The two companies will form a joint venture to make endoscopes and other medical devices, according to finance ministry filings yesterday. Olympus is the world’s largest endoscope maker with a 70 percent market share.
Sony president Kazuo Hirai set a goal of entering into new businesses when he took over in April with the company reeling from four years of losses. The investment will help Olympus, which admitted to a 13-year accounting fraud last year, shore up its capital ratio as it recovers from the scandal that led the company to restate earnings and replace its entire board.
“There can be synergies between the two companies as Sony’s image sensors can be used in endoscopes,” said Yuji Fujimori, a Tokyo-based analyst at Barclays PLC. “Still, it may take time for their businesses to bring results as medical equipment usually needs regulatory approval before going on sale.”
Sony will buy an 11.46 percent stake in Olympus and become its largest shareholder in two tranches. In the first, to be done by Oct. 23, Japan’s biggest consumer-electronics exporter will purchase 13.1 million shares at ￥1,454 apiece, costing ￥19 billion. In the second tranche, Sony will buy 21.3 million shares at the same price, costing ￥31 billion. This will be completed by Feb. 28.
The share sale was divided in two transactions because of antitrust regulatory reason, they said.
The two companies will set up a joint venture by the end of this year to develop, make and sell new endoscopes and other medical devices. Sony will hold 51 percent of the venture and Olympus 49 percent.
Sony and Olympus also agreed to make efforts to elect one director, selected by Sony, into Olympus’s board, according to a joint statement.
Olympus restated five years of earnings in December and took a US$1.3 billion cut in its net assets after admitting it paid inflated fees on takeovers and overpaid for three Japanese companies to conceal past investment losses.
The company wants to increase its capital ratio — the ratio of equity capital to total assets — to more than 30 percent by March 2017 from 2.2 percent as of the end of June. Olympus president Hiroyuki Sasa said in June a tie-up may help accelerate growth in its camera and medical businesses.