Hari Kari is defined as a ritual suicide by disembowelment practiced by the Japanese Samurai. The Samurai is looked upon as a high ranking noble, if ever there were nobles that believe they have entitlement in the upper ranks of society, this may be the story. The October 26th headline news in Reuters presents an intriguing plot for readers as to an acquisition that smells afoul.. The cast for this drama includes Stryker (the seller), Olympus (the buyer), the Viscogliosi Brothers (the original buyers and advisors), a disgraced CEO (Kikukawa), a fired CEO (Woodford) and a Japanese company that may have been sold futures when it came to their acquisition of OP-1 by a business partner/advisor.
But before we go any further, one must ask the question, what is Olympus doing in making investments and acquisitions into ventures that are totally out of the realm of their business model and expertise? Portfolio diversification? Just for historical purposes, many years ago the Almighty Stryker acquired the licensing rights to BMP-7 from a company named Curis Biomolecules for $200 plus million. After years of dumping, that's dumping, not pumping capital into this black hole of a product, the best that they could get was an HDE (human device exemption) and a delicate ass whooping from the DOJ for some company related improprieties, advocating off-label use. So why do you think Stryker was selling you OP-1 for $60 million, regardless that the original price that the VBrothers were offering was $50 million? Could it be that Stryker was looking to get rid of the proverbial Albatross from around their neck, an obvious fitting metaphor, for a product that was sucking capital and placing them under scrutiny with the USDOJ? Could this deal have evolved into an age old act of protective agreements and political marriages in order to accumulate power eventually surpassing tradition, of course that being the traditional way of doing business in the Japanese culture? Were the Japanese involved in this deal following the bushido, the moral principles to live honorably?
The plot thickens when Reuters reports that the deal may have cost Olympus 50% more, thanks to payments made to its advisors, the V Brothers. The V Brothers and Olympus are bound by a confidentiality agreement, therefore, the basis for the story is centered around a $25 million dollar loan that Olympus made to the V Brothers that carries an eight year term, with a 7% interest rate, and would be collateralized by the Viscogliosis' interest in Small Bone Innovations (SBI), and Paradigm Spine (how diluted are those companies). But here is where the deal between both parties gets interesting, the V Brothers utilized the proceeds from the loan to pay back a $30 million debt facility (loan) from Fortress Investment Group of NYC., and under the terms of their agreement Olympus agreed to forgive $2 million of the loan every year, starting in January of 2012 which would leave a balance of $22.8 million and accrued interest if the product received certain approvals by 2015 or 2018. Yet, in August, Olympus Biotech expressed concerns about the value of the collateral (surprise), it has with the V Brothers, and former CEO Michael Woodford who challenged Olympus' acquisitions and was fired in a coup by the BOD, was told that Olympus would need to write off the loan.
Reuters reports that the FBI are investigating the massive advisory fee and Woodruff himself has called upon authorities in Japan and Britain to launch investigations of their own. TSB wants to know what our readers think, is this a House of Cards, or is this a House of Blues? As Robert Cray sang,
Coffee for my breakfast, shot of whiskey on the side
It's a dark and dreary morning, with the clouds covering up the sky
The forecast calls for pain, I can hear approaching thunder
I can feel the chills run up my spine, I've seen love freeze before
And I know I'm on borrowed time, the forecast calls for pain