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Sharp considering excluding Foxconn backers from vote

Bloomberg

Sharp Corp.’s lawyers are recommending that two board members be excluded from a final vote on competing bailout plans, possibly tipping the balance in favor of a proposal from Innovation Network Corp. of Japan, people with knowledge of the matter said.

Masahiro Sumita and Shinichi Saito, supporters of a bid from Foxconn Technology Group, face a potential conflict of interest because they work at Japan Industrial Solutions Ltd., a holder of Sharp preferred stock, the people said, asking not to be identified as the information is private. Sharp’s board could make a final decision on the rescue plans as early as Saturday, one of the people said.

Saddled with debt and struggling with chronic losses, the board of the century-old consumer electronics maker has to decide between INCJ’s plan to restructure by spinning off businesses or staying as one under a foreign parent with Taiwan’s Foxconn. Sharp’s fate is regarded as a test case of Japan’s willingness to embrace overseas investors.

The board is divided ahead of Foxconn’s Feb. 29 deadline, with each side winning the support of at least four of the 13 directors, separate people said earlier this week.

Foxconn’s ¥660 billion proposal includes an offer to buy preferred stock held by Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc. in Sharp, people familiar with the matter have said. INCJ’s plan includes injecting ¥300 billion of cash, asset sales by Sharp and getting the company’s banks to cancel shares they own, according to documents obtained by Bloomberg News.

“Foxconn’s bid for Sharp is clearly superior. The competition’s offer remains much lower in terms of money for Sharp,” Foxconn said in a statement. “We have a plan that the Sharp board knows we are prepared to immediately implement to make Sharp profitable and return it to its position as a global technology leader.”

Toyodo Uemura, a spokesman for Sharp, declined to comment. Kenjiro Kobayashi, a spokesman for JIS, declined to comment. JIS declined to make the two Sharp directors available for comment.

Mizuho and Mitsubishi UFJ are major shareholders of Japan Industrial Solutions, owning 14.9 percent each. The investment fund, where Sumita is chairman and Saito the president, specializes in financing corporate turnarounds. It bought ¥25 billion of Sharp preferred stock last year, according to a filing.

Sharp has not made a decision yet on whether to exclude the two directors, the people said.

Foxconn’s billionaire chairman, Terry Gou, flew to Japan earlier this month to personally appeal to the board, shortly after Sharp Chief Executive Officer Kozo Takahashi said he planned to take another month to choose between Foxconn and INCJ. Gou said Feb. 5 that negotiations are 90 percent complete and a final agreement is expected by the end of February.

INCJ estimates its total package is worth about ¥1 trillion, including Sharp selling its stake in Sakai Display Products Corp. and financing from lenders, the documents presented to Sharp show.