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Foxconn not ready for Sharp deal
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SHARP Corp yesterday agreed to be bought by Foxconn in what would be the biggest takeover of a Japanese tech firm by a foreign company, but the Taiwan-based company said it needed to clarify terms and was not ready to sign.
The loss-making display maker said it would issue around US$4.4 billion worth of new shares to give Foxconn, known formally as Hon Hai Precision Industry Co, a two-thirds stake.
Foxconn’s investment is set to total more than 650 billion yen (US$5.8 billion), a source familiar with the matter said.
If the deal is signed, it would boost Foxconn’s position as Apple Inc’s main contract manufacturer and enable Sharp to start mass-producing organic light-emitting diode screens by 2018, around the time Apple is set to adopt the next-generation displays for its iPhones.
Sharp issued a 31-page release detailing the proposed agreement but Foxconn later said in a statement that Sharp on Wednesday morning had “couriered over a new key document” that needed clarification and that it had told the Japanese firm of this.
Two sources with direct knowledge of the matter said the Japanese group had contingent liabilities that amounted to “hundreds of billions of yen.”
That issue would have to be resolved before a deal could be finalized, said the sources, who spoke on condition of anonymity as the talks are confidential.
The sources did not elaborate on the nature of the liabilities or the exact amount.
A spokesman for Foxconn declined to comment on the issue. Sharp also declined to comment.
Sharp’s decision comes after five years of courting by Foxconn founder and billionaire Terry Gou, who sees ownership of Sharp as a way to better compete with Asian rivals such as Samsung Electronics Co.
“Sharp has the technology to build out the components to compete with Samsung as an Apple supplier, which means that with Sharp under its umbrella Foxconn can help Apple wean itself off Samsung,” said Gavin Parry, managing director of Parry International Trading, a brokerage in Hong Kong.
“This gives Foxconn better pricing power with Apple,” he added.
Sharp’s board voted unanimously to accept the Foxconn offer over a rescue by a state-backed investment fund, CEO Kozo Takahashi said.
Sharp said it aimed to become a global supplier of OLED screens, which are thinner, lighter and more flexible than current displays. South Korea’s Samsung Display and LG Display are also investing heavily in the new technology.
The century-old Japanese firm was once a highly profitable manufacturer of premium TVs and a favored screen supplier to Apple.
But it has struggled in recent years as massive investments in advanced liquid crystal display plants failed to pay off amid price competition with Asian rivals, and two bank bailouts since 2012 did little to help turn its business around.
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