Taiwan's Foxconn Offers $5.3 Billion to Take Over Sharp
January 20 2016 - 11:40PM
Dow Jones News
Foxconn, the Taiwanese company that assembles the bulk of the
world's iPhones, has offered about ¥ 625 billion ($5.3 billion) to
take over troubled Japanese electronics maker Sharp Corp.,
according to people familiar with the matter.
Sharp, which has been bailed out repeatedly by banks, is set to
review a competing offer from Innovation Network Corp. of Japan, a
government-backed investment fund. The Nikkei newspaper reported
this week that the fund was weighing a bid that could top ¥ 300
billion. It wasn't clear whether the bid would require Sharp's main
creditors to swap some of their debt for equity.
Japanese officials have expressed concern about letting Sharp
come under foreign control, citing the company's technology in
display panels. Innovation Network Corp. of Japan already owns a
controlling stake in Japan Display Inc., another major display
maker. Officials say the two Japanese panel makers share know-how
in next-generation panel technology and mass production.
"Japan's technology is leading the rest of the world and we
would like to help make it even more competitive," industry
minister Motoo Hayashi said this week.
Foxconn, formally known as Hon Hai Precision Industry Co., is
offering more money for Sharp and a willingness to shoulder all of
its debt, people familiar with the offer said. Those conditions are
meant to persuade Sharp's creditors to make a decision based on the
economics of the deal, rather than political considerations, one
person familiar with the matter said.
Sharp faces a March due date for repaying a total of ¥ 510
billion in borrowings, according to Standard & Poor's. Sharp
has said its main creditors are banking units of Mitsubishi UFJ
Financial Group Inc. and Mizuho Financial Group Inc.
Foxconn has no plans to replace Sharp's top management, people
familiar with the offer said, a step meant to reassure Japanese
officials worried about a foreign takeover. They said Sharp and its
lenders hope to reach a decision by Feb. 4, when Sharp is scheduled
to announce its latest quarterly results.
Foxconn and Sharp declined to comment. INCJ couldn't immediately
be reached for comment.
Sharp, which makes everything from televisions to solar panels
to display panels for Apple Inc.'s iPhones, turned to its two main
banks in May 2015 for its second rescue in three years. In the
fiscal year that ended March 2015, Sharp suffered a net loss of ¥
222 billion.
Conditions have worsened since then. In its most recent
half-year results, it posted an operating loss of ¥ 25.2 billion,
citing deteriorating Chinese demand for smartphone displays.
In 2012, Terry Gou, Foxconn's chairman, personally acquired a
38% stake in a Sharp display factory in Sakai, Japan. At the same
time, Foxconn agreed to buy a 10% stake in Sharp, but that deal
unraveled in 2013 after dismal earnings reports sent Sharp's shares
plunging.
Despite Sharp's troubles, the company's display and
manufacturing know-how remain attractive to Foxconn, people
familiar with the companies said. Also, while Foxconn principally
assembles electronics to be sold under other brand names, the Sharp
brand could be valuable if Foxconn wants to sell its own products
to consumers.
Atsuko Fukase and Eva Dou contributed to this article.
Write to Wayne Ma at wayne.ma@wsj.com and Takashi Mochizuki at
takashi.mochizuki@wsj.com
(END) Dow Jones Newswires
January 20, 2016 23:25 ET (04:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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