Foxconn agrees to acquire Sharp after slashing price by US$900m
Print Edition
TAIWAN-BASED Foxconn has agreed to buy Japan’s Sharp Corp at a big discount to its original offer, capping a month of wrangling that sowed more doubt over whether the two companies can work together and fend off fierce competition from rivals.
Foxconn, formally known as Hon Hai Precision Industry Co, will pay about US$3.5 billion for a two-thirds stake, cutting its initial offer by nearly US$900 million following the emergence of previously undisclosed liabilities at Sharp.
The deal marks the largest acquisition by a foreign company in Japan’s insular tech industry and the end of independence for a 100-year-old company that started out making belt buckles and mechanical pencils.
It also gives the world’s top electronics contract manufacturer control of Sharp’s advanced screen technology and helps strengthen its pricing power with major client Apple Inc.
Under the revised terms, Foxconn will pay 88 yen (78 US cents) per share, the companies said in a statement, a 35 percent discount to yesterday’s close and likely reflecting in part Chinese obsession with the lucky number eight.
Foxconn also agreed to buy all 200 billion yen worth of preferred shares owned by Sharp’s two main creditor banks, a source familiar with the matter said yesterday.
It also has the option of increasing its stake in Sharp next year.
The firms had been on the verge of finalizing terms last month when contingent liabilities at Sharp were suddenly revealed, causing Foxconn to hit the pause button.
That revived ill will from four years ago, when Foxconn agreed to take a stake in Sharp as part of a broader partnership. Sharp then warned of losses and Foxconn walked away as shares in the Japanese firm sank.
Analysts said that even without the history of distrust, there was little assurance the combination will be able to deflect pricing pressure in LCDs or beat rivals in OLED — organic light-emitting diode — a new screen technology which Apple is expected to adopt for its iPhones by 2018.
“If you’re talking about two years, it will be difficult. Three years, there is potential. Five years, then definitely,” said Kylie Huang, analyst with Daiwa-Cathay Capital Markets.
Samsung Electronics’ display unit and LG Display will for some time likely remain the preferred choice for OLED screens, she added.
Analysts also said Foxconn, which reported record net profits for last year, was taking on a significant financial risk.
Highlighting Sharp’s dire finances, the ailing display maker estimated an operating loss of around 170 billion yen for the year through today.
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