Hon Hai chief to visit Sharp, present new bailout proposal

JIJI, Kyodo

Terry Gou, chairman of Taiwan’s Hon Hai Precision Industry Co., was set to visit Sharp Corp. on Saturday to present a new bailout proposal, informed sources told Jiji Press.

The new proposal includes supply of growth capital that exceeds the ¥300 billion in capital that Innovation Network Corp. of Japan, a government-backed investment fund, plans to inject into the struggling Japanese electronics maker, the sources said.

In addition, the proposal does not include the sale of any Sharp businesses, the sources said.

INCJ was also scheduled to visit Sharp on Saturday to discuss its own bailout offer.

Hon Hai, also known as Foxconn, extended a deadline for bailout talks with Sharp until Feb. 4, when the Japanese company’s board is scheduled to meet to discuss its financial performance.

Hon Hai plans to spend a total of ¥600 billion on measures to reconstruct Sharp, including purchases of ¥200 billion worth of preferred Sharp shares held by two main creditor banks — Mizuho Bank and Bank of Tokyo-Mitsubishi UFJ.

Hon Hai plans to keep Sharp’s management team, including President Kozo Takahashi, in place while maintaining the Sharp brand and employment.

Hon Hai is a major supplier for Apple Inc.’s iPhones and is viewed as willing to use Sharp’s technology to produce advanced LCDs as well as to gain the leverage necessary to expand its own business in the field of solar batteries.

INCJ has proposed investing around ¥300 billion in Sharp to help rehabilitate the electronics maker in a plan that would also involve assistance from its creditor banks, sources close to the matter said.

Sharp is likely to accept the offer while Takahashi is expected to step down in a management reshuffle brought on by his failure to turn around the company’s fortunes, the sources said Friday. Sharp has struggled to keep its liquid crystal display business competitive with South Korean and Chinese rivals.

INCJ held a meeting of its decision-making panel where measures to rescue Sharp were floated, with an aim of hammering out detailed plans next month.

Sharp is likely to announce its decision to accept INCJ’s offer as early as Thursday, when the Osaka-based firm will release its latest earnings, reflecting the Japanese government’s efforts to prevent Sharp’s advanced technology from being acquired by foreign firms, the sources said.

INCJ is planning to spin off Sharp’s LCD division and allocate to the new entity ¥10 billion out of the ¥30 billion investment, the sources said. The fund will also likely integrate the unit into rival Japan Display Inc. around 2018.

INCJ owns nearly 36 percent of Japan Display, which was formed in a government-backed deal in 2012 from the ailing display units of Sony Corp., Toshiba Corp. and Hitachi Ltd.

The fund will also consider splitting Sharp’s money-losing “white goods” business to integrate it with that of Toshiba, which has been under pressure to restructure in the wake of a massive accounting scandal.

Under the plan, Mizuho Bank and the Bank of Tokyo-Mitsubishi UFJ are expected to extend financial assistance of up to ¥350 billion, the sources said.

The company will specifically seek to convert ¥150 billion in existing loans to preferred shares in a debt-for-equity swap while also purchasing ¥200 billion yen worth of preferred shares currently owned by the two banks for ¥1, the sources said.

Sharp was rescued last May in a ¥225 billion bailout from banks following a slump in the LCD business, leading to further turnaround efforts including job cuts and the sale of its head office building amid pressure from lenders frustrated with the firm’s slow progress in improving its earnings.