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Sharp to drop Hon Hai tieup talks

Kyodo

Ailing electronics giant Sharp Corp. plans to terminate stalled capital tieup talks with Taiwanese business partner Hon Hai Precision Industry Co. and will prioritize alliance negotiations with another firm, sources revealed.

Sharp has concluded that the possibility is low of reaching an accord in the near future with Hon Hai, also known as Foxconn, as it is taking time to complete the necessary procedures with Taiwanese authorities, the sources said Friday.

The deadline for forming the capital alliance between the two companies is March 26.

The Osaka-based electronics giant will thus switch its focus to discussions with another company that has approached it over a potential capital deal, the sources said, without identifying the other firm.

However, Sharp will maintain its business alliance with Hon Hai, including the joint operation of a liquid crystal display plant in Sakai, Osaka Prefecture, they added.

Last March, Sharp concluded a capital and business tieup with Hon Hai under which the Taiwanese company was to purchase a 9.9 percent stake in Sharp at a price of ¥550 per share by this March 26.

But Sharp’s stock price has since plummeted as its business performance deteriorated, prompting the two companies to launch talks on revising the terms of the accord. However, these negotiations have stalled amid various differences of opinion, notably the share price to be paid by Hon Hai.

For its part, Hon Hai has grown more cautious toward investing in Sharp, as their existing business alliance has generated few notable results, except for the jointly operated Sakai facility. A worsening of Hon Hai’s business environment stemming from its reduced output of Apple Inc.’s iPhone 5 also appears to be affecting the company’s stance on the envisioned tieup.

After assessing the prospects of the tieup talks with the unnamed company, Sharp is expected to announce a medium-term business plan in March, when it will also announce it is abandoning the investment plan with Hon Hai, according to the sources.