Structure of Gyrus commission

In mid June 2006 Olympus paid US-registered Axes America the sum of $3 million in "basic fees", and agreed to pay a "completion fee of 1 percent of the acquisition price in addition to the basic fee for advisory work relating to acquisitions." One year later, the agreed rate of "completion fee" to Axes was increased to 5 percent, payable in a mixture of cash, share options and warrants; it disbursed a further $2 million.^[14] When the Gyrus acquisition was announced, Olympus paid over $12 million, being the cash portion of the agreed "completion fee".^[14] In September 2008, to top up the cash part of the advisors' success fee, Gyrus issued ¥176.98 million of preferred stock to the AXAM against the advice of company auditors, according to Nikkei Business Daily.^[14][35] Olympus paid over a further $50 million, nominally as cash settlement for warrants.^[14] Regulatory disclosures in the UK show that the preferred stock was allotted on 30 September by Tsuyoshi Kikukawa, Hisashi Mori and Akihiro Nambu (the latter being head of investor relations for Olympus). The identity of the beneficiary – Axam Investments – was only made publicly known more than 18 months later.^[11] Three days after the preferred stock was allotted and without the benefit of professional advice, a "supplemental agreement" was signed by Olympus officers that gave AXAM power of veto over "any important decision in the Gyrus business".^[14]

A buyback of preferred shares for $530–590 million was authorised by the Olympus board.^[35] Axam subsequently negotiated a further increase in the value of the shares, for which Olympus finally paid $620 million in March 2010.^[36] According to a UK corporate filing for Gyrus, the value of the securities at the time was disclosed as $177 million. Bloomberg notes that executives Olympus had delayed accounting for the true cost of the 'success fees' of Gyrus until March 2011, by which time Axam Investments had been struck off by the Cayman Islands registrar for nine months.^[11]

Date: 2015-01-29; view: 708