Olympus Possibly to Sell Imaging Business

Earlier today Olympus Corporation announced that it had signed a memorandum of understanding with Japan Industrial Partners, Inc. (JIP) to carve-out Olympus’s Imaging Business.

NOTE to readers: This is an updated article.

Readers who would like to read the official Olympus Corporation press release can use the link provided.

Peta Pixel has reported that until the transaction is finalized (planned for the end of 2020) it is business as usual for Olympus, and that product launches planned for 2020 will continue.

I would encourage readers to have a good look at the information provided by the links as it will help you come to your own conclusion about the future of the Olympus camera products.

Before we all get ahead of ourselves, it is good to remember that a deal has not yet been finalized. Various negotiations and assessments will be happening over the next number of months. These are planned to conclude by September 30, 2020 at which time a definitive agreement may be signed. Should that occur, the date for the transaction to be finalized is December 31, 2020.

While this news may come as a shock to many Olympus owners, it is prudent to put it in context. While Olympus was making some headway with its camera business in terms of bringing new technology to market, and trying to bring its costs in line with market volume realities, it simply was not enough to weather the COVID-19 storm.

It is anticipated that many industries are facing 3-5 year recovery cycles due to the business impacts of COVID-19. Since cameras are discretionary ‘luxury goods’ the recovery cycle would have pushed financial losses for the Olympus imaging division for some additional years into the future. This appears to be something that the board of directors could not accept.

So, let’s look at the options that Olympus faced with its imaging division and the added pressures brought to bear by COVID-19.

Option 1 was simply to shut the imaging division down. This would have ended the Olympus camera product line immediately. Terminations of employees would have occurred. All of their expertise and knowledge would have left. If Olympus would have closed the imaging business it would have needed to sell whatever related assets in terms of manufacturing facilities and patents that it could to recoup some amount of capital. Given the precarious state of the worldwide camera business for all companies engaged in it, the potential marketability of those assets is questionable.

Option 2 would have been for Olympus to sell its imaging division to a direct competitor, either as a complete entity, or sell some of the assets that a competitor may have wanted, e.g. IBIS patents. Given the state of the camera market it is doubtful that any direct competitor would have had the cash flow to buy part or all of the Olympus imaging business. And, even if they did, the Olympus product line probably would have disappeared since the competitor likely would have cherry picked some assets and moved on.

Option 3 is what Olympus is pursuing… carving out its Imaging Division and selling it to an outside company that specifically deals with troubled business units.

There are risks associated with Option 3 for owners of Olympus cameras. I do not know much about Japan Industrial Partners (JIP) other than it is a private equity company that has been in existance for about 20 years.

Many private equity companies buy depressed businesses and immediately dismantle them and make their profits by piecing out the assets. If this is the case with JIP then the future of Olympus cameras is still in high jeopardy.

The other approach used by many private equity companies is to ‘fix’ an underperforming division, then flip it to another buyer once it is in a breakeven or profitable position. In some cases they keep the business turnarounds, like the Canadian company Onex often does. If this is the road that JIP intends to take with the Olympus imaging division, then the future of the camera line is much more positive.

If you read the official press release from Olympus, it does indicate that the intent is for the imaging division to continue producing and developing products into the future. This is outlined in Section 2 of the memoradum of understanding. The last two paragraphs of Section 1 also indicate the intention for the imaging division to continue its operation. Whether this actually comes to pass remains to be seen.

It is also unclear at this time exactly what the ownership of the new company to which the Olympus imaging division may be transferred will be. The following is a paragraph from the official Olympus press release (second last paragraph in Section 1). The bold face type is my addition.

“Under such circumstances, Olympus considers that, by carving-out the Imaging business and by operating the business with JIP, the Imaging business’s corporate structure may become more compact,
efficient and agile and it is the most appropriate way to realize its self-sustainable and continuous growth and to bring values to the users of our products as well as our employees working in the Imaging business. Olympus therefore has decided to sign the memorandum of understanding for the Transaction. ”

Again, we do not know the details of the transaction and how the ownership of the new company will be structured. It may end up being 100% owned by JIP.

Another possibility is that the carve-out may end up being structured as a joint venture of some sort with JIP and Olympus both owning shares. But,  with the carve-out being a separate entity from Olympus Corporation and potentially a private company not publically traded.

If the carve-out ends up being something in which Olympus still has an ownership interest, Olympus  may still have access to technology developed by the carve-out company. This could serve the interests of the medical and scientific divisions of Olympus.

Under this joint venture scenario, the expertise of JIP to cut costs and restructure the imaging division may be what Olympus needed to try to salvage the camera business.

Carving out the imaging division from Olympus Corporation would make the stock of the parent company more appealing to investors as the carve-out company would be a separate entity.

We also do not know at this time if there is the potential for Olympus to buy-out JIP under a joint venture scenario should the imaging division become profitable in the future.

The joint venture possiblity is pure conjecture on my part.

I checked the price of Olympus Corporation stock this afternoon. It has risen from 1922 Yen to 2132 Yen, so the carve-out news is being well received by investors.

So, change is coming down the road. Those of us who own and use Olympus products can be encouraged that the imaging division does not appear to be closing down immediately. This was the big fear in the rumors that surfaced in 2019.  It may, or may not, continue under new owernship and in a new corporate structure. This will not be known until the end of September 2020, with the potential deal closing at the end of 2020.

At this point it is unclear how much involvement that Olympus may have in the new carve-out company should it be created… although there is an initial indication (as noted with my earlier bold face highlighting), that Olympus may still be involved operating the imaging business with JIP.

It will be interesting to see what happens to other camera manufacturers and brands in the future. I wonder if those that have not been as innovative as Olympus will survive in any form, or if they will simply be shut down as the camera market continues to contract.

For my part, I have no regrets buying my Olympus camera gear. It is still the finest camera equipment that I have had the pleasure to own and use. I anticipate that I will be using it for many years to come.

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12 thoughts on “Olympus Possibly to Sell Imaging Business”

  1. Thom, I am really sorry man but to put this on Covid-19 is a statement on denial. Not even Olympus in the press release blamed Covid for this.

    The truth is Olympus Imaging was losing money quarter by quarter well before Covid-19 was a name. And at the end of last year Olympus CEO did slip that Olympus Imaging could be for sale, only for Olympus PR to back track in the weeks that followed that it’s not true, they were not selling.

    Covid has crashed the camera market faster, has accelerated it, but none of this is because of Covid.

    Look at who JIP is and what they do. This is Olympus the company doing a way to get around some Japanese business laws (they are not alone in this obviously), and get rid of their one and losing money division.

    Olympus Medical is super healthy and getting even more money from last year though a big China market expansion. Olympus Imaging was dragging those profits down.

    My plan is to continue shooting m43rds since I have all I need until it breaks or a major innovation comes around. Long term I will probably go back to Fuji.

    It’s unlikely this is the only company that will be in this boat. I think long term the survivors are Canon, Sony. Nikon could be but not sure – at least for Cameras. Ironically Pentax will probably still carry on 🙂

    If Olympus Imaging ends up being “a Vaio” maybe at least we keep to have repair/service.

    1. Hi Ricardo,

      I did not keep the link, but some additional comments were made by Olympus executives that did mention COVID-19 as a contributing factor for the MOU signing. I agree that the pandemic was not mentioned specifically in the Olympus MOU press release.

      I certainly agree that one of the scenarios is that JIP takes Olympus over, then pieces it out to generate a profit… this was mentioned in my article.

      I did “look at who JIP is and what they do” before I wrote this updated article. Since JIP is a private company I was unable to get a lot of details but I did learn a few interesting things.

      I did find some partial information on Pitchbook that provided some very high level information about some of JIP’s investments (no company names were shown). Information is in order of Deal Date, type of company, and status.
      Deal date: 31 July 2019, electrical equipment, generating revenue
      Deal date: 11 April 2017, electrical equipment, generating revenue
      Deal date: 01 July 2016, clothing, profitable
      Deal date: 01 July 2014, computers, parts and peripherals, generating revenue (this is likely the VAIO deal)
      Deal date: 31 March 2014, cable service providers, Profitable

      It is interesting that the last deal mentioned (31 March 2014) can be traced through news releases to be NEC BIGLOBE. At the time when it was purchased by JIP, NEC BIGLOBE was Japan’s fourth largest internet service provider. JIP bought NEC BIGLOBE for JPY70 billion in 2014 and sold it three years later in 2017 to KDDI for JPY80 billion. So, they turned it around and made a profit from that investment… plus NEC BIGLOBE is still operating today.

      So, let’s not automatically assume that the Olympus Imaging Division is simply going to be dismantled and sold off quickly. Nor should we assume that JIP may not keep the Olympus Imaging Business for a number of years to turn it around… or at least resell it.

      Japan Industrial Partners has been able to raise a good amount of investment capital when needed. For example, on 29 March 2018 it was reported that Japan Industrial Partners was set to raise $1.4 Billion from investors: https://www.avcj.com/avcj/news/3009278/japan-industrial-partners-set-for-usd14b-fundraise

      There is much more to all of this than first meets the eye… and more than is being reported on camera-related websites.

      No doubt Olympus Corporation needed to carve-out the Imaging Business, especially in light of COVID-19. Given the unique attributes of the Olympus product line, some of its industry leading technology, and its product differentation, there is potential for JIP to make money buying the Olympus Imaging Business if they can turn it around like NEC BIGLOBE, and sell it down the road for a profit. Whether this is JIP’s intent or not remains to be seen.

      We will have to wait to see how all of this turns out over time.

      Tom

  2. Tom,

    I was saddened by this news when I saw it first on the M43 Rumors site, thinking it may just be another rumor. As it turned out, it wasn’t. I echo what a DPR comment said so wisely “regardless of your brand loyalty, this affects us all” (my paraphrasing). Trolls who have always looked down on Olympus may react with glee but considering the widespread effects of the pandemic coupled with other things happening in our world, this could have a ripple effect on the industry. I guess no camera maker, no matter how big or influential, can be safe.

    I think what’s important, at the end of the day, is that we are happy with our choices regardless if our brand of choice will be gone tomorrow or next month or next year.

    Oggie
    http://www.lagalog.com

    1. Hi Oggie,

      Thanks for sharing your perspectives! Camera businesses and brands have changed ownership in the past… imaging is a dynamic business!

      We need to remember that Olympus has not announced the closing of its imaging business. The sale has yet to be completed, and its terms and structure are unknown at this time. None of us know the potential effects of the possible sale of the imaging division on the future of Olympus cameras and other products. This will become clearer in the months and years ahead.

      As humans the majority of us focus on what we perceive we will lose through change, not what may be gained. Should the proposed sale result in a more efficient, more responsive and more financially viable imaging business, then history will judge current events in a positive light.

      Tom

  3. It seems a repetition, what a pity, it happened with film cameras, and it happens again with digital cameras. Either we are oly users or not it affects to all of us

  4. Hi Tom;
    you’d written an article not all that long ago about orphaned camera systems and I thought of that when I heard the news yesterday.

    I’d bought a Nikon 1V2 and the 70-300 Nikkor, based not on any recommendations by you, but by seeing your consistently wonderful photos on your blog. I was happy to trade my Pentax APC cameras and large Sigma 150-500mm for a smaller, lighter and better focusing kit.

    I’d been struggling over the decision to move my other photography to compact full-frame ILC or to Fuji or to consolidate in the Olympus system. Over the past week the decision making had been really intense.

    By chance I happened to check to see if a full 1V3 system was available for a reasonable price – I figured it would be a good upgrade while I was struggling with my decision and waiting for the price of the EM1 Mk 3 to come down. I pulled the trigger on Friday and received it today.

    It seems so solid and high quality I think I will stay with the 1 system for now for sports, wildlife and birds and the Pentax APC system for all other photography. One of my V2’s with the 10-30mm PD will become my always in the bag camera (replacing a Canon G7x that had lens problems). In the meantime I’m going to monitor the Olympus situation and their prices and make the switch when we all have a better handle on the situation.

    Thanks for your always level head and care and insight about small-sensor cameras. I really hope that JIP keeps Olympus together – its technology really seems to be great – I am really looking for to the hand-held high res and LiveND features.

    1. Hi Dori,

      Thank you for adding to the discussion and sharing your experiences!

      As my updated article points out, there are still so many unknowns that it is good that all of us remain as calm and rational as we can given the preliminary news about Olympus.

      It is interesting that until July 5 2020, Olympus does have an incredible deal available for folks who are interested in three of the company’s PRO lenses… the 7-14 mm f/2.8, the 40-150 mm f/2.8 and the 300 mm f/4. If those three lenses are purchased together, the buyer can choose one of three bodies to be include at no extra cost. If my memory serves those three bodies are the E-M1 Mark II, Mark III or M-1X.

      It can be difficult to keep one’s emotions under control during these rapidly changing times. My revised article was a result of me standing back a bit and trying to be more broad based.

      Tom

  5. The VAIO line actually disappeared for almost 4 years except from rebranded products in Asia. The current VAIO products are parts bin rebrands with little to no original design. They have very poor service and , like many Asian-focused companies, don’t have robust warranties because of a different legal environment.
    JIP is a company we would call a “vulture fund”. They buy distressed assets or companies and divest them of liabilities (pensions, warranties) and part them out for the highest value. Often, companies that have a liability on the balance sheet will actually pay JIP or similar for the asset. It’s not a sale, but a “take this pile of crap off my hands” transfer.
    JIP is not a steward of a brand or mount. It has a tiny fraction of the capital necessary to keep Olympus going as a camera manufacturer.
    Sadly, I think this is the end of Olympus in the world of photography. The only caveat is this is not a sale, but a disclosure to discuss. Brand Olympus might get cold feet. Right now, this announcement killed sales outright. The company will be in negative revenue once servicing and keeping the lights on are factored in. No position spin will keep people buying.

    1. Hi Scott,

      Thanks for the additional information. I was having some difficulty finding information about JIP since it is a private company. I have adjusted the article accordingly.

      Tom

  6. Oh well. I’ll still keep it.

    The Nikon 1 System was way ahead of its time. I’m in the process of selling all of my Nikon 1 stuff now.

    1. Hi Michael,

      All of the things that I loved about Nikon 1 haven’t changed… so we’re keeping our kit. As far as my Olympus gear goes… it is just business as usual for me.

      Tom

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