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Samsung to buy 3% stake in rival Sharp

by Hiroko Nakata

Staff Writer

Sharp Corp. said Wednesday it will receive a ¥10.4 billion investment from Samsung Electronics Co. and provide the South Korean technology giant with a stable supply of large LCD panels, giving the embattled Japanese firm a needed cash lifeline.

Under the deal, Sharp will sell a 3 percent stake to its Asian rival by issuing new shares later this month. The stake will make it the largest foreign shareholder and the fifth-largest overall.

The announcement of the Sharp-Samsung deal could put to rest growing concerns about Sharp’s health, as tieup talks with Taiwanese business partner Hon Hai Precision Industry Co., better known as Foxconn, have stalled.

“This capital alliance will enable Sharp to secure its source of revenue from (the) LCD business forming the company’s core,” Sharp said in a statement. “Sharp will certainly position its business for growth by continuously accelerating implementation of its business restructuring to realize a ‘recovery of business performance and credibility,’ ” it added.

Sharp’s stock surged on the news, finishing Wednesday 14.05 percent higher at ¥341 on the Tokyo Stock Exchange.

The company, which currently supplies Samsung with LCD panels, will further boost the alliance, providing a long-term supply of LCD panels for large TVs as well as those for small and medium-size LCD panels used in mobile devices such as notebook computers, it said.

The struggling Osaka-based electronics firm had aggressively invested in large LCD and solar panels, only to see demand weaken and prices plummet as a result of fierce competition with Samsung and other South Korean and Chinese firms.

The deal could prove a boon for LCD panel production, particularly at Sharp’s Kameyama plant in Mie Prefecture, which also manufactures the panels for Apple’s iPhones. Sharp could also supply Samsung with IGZO-based displays, which have low power consumption and high performance, for mobile terminals.

Capital tieup talks with Hon Hai have been stalled since Sharp’s shares nose-dived amid fears over its financial health.

Sharp’s share price briefly plummeted to just one-third of what it was when it reached a preliminary agreement with Hon Hai last March. At the time, Hon Hai had agreed to purchase a 9.9 percent stake in Sharp for ¥67 billion at ¥550 per share. The two attempted to renegotiate these terms, but talks stalled. The deadline for the deal is March 26. Hon Hai has reportedly grown more cautious about further deals with Sharp.

Sharp needs to raise capital before ¥200 billion in convertible bonds mature in September.