Foxconn’s Sharp deal hits last-minute problem

Taiwanese company puts first foreign takeover of a major Japanese electronics maker on hold

PUBLISHED : Thursday, 25 February, 2016, 4:37pm
UPDATED : Thursday, 25 February, 2016, 10:43pm

Taiwan’s Foxconn put its takeover of electronics maker Sharp on hold on Thursday after it said it had received “new material information” from the Japanese company, throwing into doubt what was set to be the biggest takeover by a foreign firm in Japan’s technology sector.

Loss-making Sharp announced earlier on Thursday that it had agreed to be bought by Foxconn, a contract manufacturing firm that is a major supplier of ­iPhones to Apple. But, in a separate statement issued just hours later, Foxconn said it would not sign until it had clarified terms.

It did not elaborate.

Two sources 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 finalised, they said.

The sources did not elaborate on the nature of the liabilities or the exact amount.

A spokesman for Foxconn, known formally as Hon Hai Precision Industry, declined to comment on the issue. Sharp also declined to comment.

The 11th-hour delay throws into doubt a deal that would have marked the conclusion to five years of courting by Foxconn founder and billionaire Terry Gou and the opening of Japan’s insular tech sector to foreign investment.

Sharp said it would issue around US$4.4 billion worth of new shares to give Foxconn a two-thirds stake.

Foxconn’s investment was set to total more than 650 billion yen (HK$45 billion), a separate source said.

If a deal does go through, it would boost Foxconn’s position as Apple’s main contract manufacturer and enable Sharp to start mass-producing organic light-emitting diode (OLED) screens by 2018, around the time Apple is ­expected to adopt the next-generation displays for its iPhones.

Foxconn sees ownership of Sharp as a way to better compete with Asian rivals such as Samsung Electronics of South Korea.

Before Foxconn’s statement, Sharp’s stock tumbled to end 14 per cent lower as investors worried that the share dilution from the deal could be larger than ­expected.

Reuters, Bloomberg