Sharp eyes quick close to Hon Hai takeover deal

Kyodo, Bloomberg

Sharp Corp. said Monday it hopes to finalize a takeover deal with Taiwan’s Hon Hai Precision Industry Co. “as soon as practically possible” without setting a deadline for inking the bailout package.

“Sharp and Hon Hai Precision Industry have not set a signing date,” the electronics giant said in a statement. “Both companies are working hard to reach a satisfactory agreement as soon as practically possible.”

The statement came after sources familiar with the matter said before the weekend that Sharp and Hon Hai agreed to extend their negotiation deadline beyond Monday, and that Hon Hai’s proposal would remain valid until then.

Sharp decided Thursday to accept an offer from Hon Hai, better known by its trade name Foxconn, to take over the Osaka-based firm, in what would be the first acquisition of a major Japanese electronics maker by a foreign company.

But hours later, Hon Hai announced it would delay the signing of a deal to clarify the content of a document submitted Wednesday by Sharp. The document is believed to include information about liabilities that could be incurred by Sharp, which has been hit by losses in its liquid crystal display business.

Hon Hai said Friday in a statement that most of the document’s content had not been provided during past negotiations between the two companies. But it expressed hope that a satisfactory agreement could be reached with Sharp.

Sharp President Kozo Takahashi and Hon Hai Chairman Terry Gou met in China on Friday, while officials of both firms have been trying to pave a way for the deal.

Bankers and lawyers are going through a list of Sharp’s liabilities that could exceed ¥300 billion, a last-minute stumbling block in Hon Hai’s bid to take control of the struggling Sharp, according to the sources.

It’s still too early to tell whether Hon Hai will lower the value of its offer or change its bid in some other way, the sources said. Any substantial change would require Sharp’s board to vote once again on the altered proposal, they said.

Hon Hai’s Gou has fought for months to take over Sharp, battling a competing offer from a once-favored domestic bidder, Innovation Network Corp. of Japan. Hon Hai offered a package worth in excess of ¥600 billion — more than twice INCJ’s bid — with most of the money going into Sharp through the purchase of additional shares.

“It’s a complicated situation. It’s difficult to judge whether Foxconn is shaking up Sharp or they really need some time to check the facts,” said Hideki Yasuda, an analyst at Ace Research Institute in Tokyo.

Hon Hai, the primary assembler of iPhones and iPads for Apple Inc., offered a premium for Sharp in a bid to gain control of the latter’s business of making glass displays for Apple’s devices, one of the most valuable components. Gou may be reluctant to take on additional financial costs as he tries to make the high-stakes deal pay off.

Under the plan accepted by Sharp, Hon Hai would get control over the company by spending ¥484.3 billion to buy additional shares at a discount and give Gou and Hon Hai 65.9 percent of the company. Hon Hai would also pay ¥100 billion for preferred shares held by lenders Mizuho Financial Group and Mitsubishi UFJ Financial Group, and additional cash for other assets.

Existing shareholders would receive nothing directly under the plan and Sharp would remain a publicly traded company. Sharp would keep its brand under new ownership and has pledged to maintain current employment levels.

Sharp seems to be under great pressure to make the deal work; besides the decline in its share price, it also faces the expiration of credit lines with its banks at the end of March.

“Sharp wants to close the deal by the end of March but Foxconn doesn’t have to hurry up because INCJ has already given up. It’s a favorable situation for Foxconn,” Yasuda said.