Taipei/Osaka – Hon Hai Precision Industry Co. agreed Wednesday to buy control of financially struggling Sharp Corp. for ¥389 billion ($3.5 billion) in the first takeover of a major Japanese electronics producer by a foreign company.
The agreement by Hon Hai, also known as Foxconn, followed weeks of uncertainty over what Sharp had said was a deal at a higher price.
Hon Hai, which assembles Apple’s iPhones, said it would buy 66 percent of Osaka-based Sharp.
On the same day, Sharp also decided to accept the reduced takeover offer made by Hon Hai, after a monthlong review of the financial standing of the troubled electronics maker.
The price of ¥389 billion was a reduction of ¥100 billion, or about 20 percent, from the ¥489 billion Sharp said on Feb. 25 that Hon Hai had agreed to pay. The Taiwanese company said at the time it wasn’t ready to sign a deal.
The companies gave no reason for the change, but news reports suggested Hon Hai was concerned about taking on additional liabilities it learned about late in the negotiations.
“We are glad both sides could reach such a decision to forge an alliance to boost innovation,” Tai Jeng-wu, a member of the Taiwanese firm’s board of directors, said during a brief appearance before reporters at the Taipei stock exchange.
Asked what its strategy would be to help Sharp recover from losses, Tai said Hon Hai’s plans called for the company to “upgrade its technology” but gave no details.
Hon Hai said a final contract is to be signed Saturday. Sharp President Kozo Takahashi and Hon Hai Chairman Terry Gou will hold a news conference on Saturday in Sakai, Osaka Prefecture.
“We have much that we want to achieve and I am confident that we will unlock Sharp’s true potential and together reach great heights,” Gou said in a joint press release.
Takahashi also expressed hope that the two companies’ strategic alliance will accelerate innovation.
The rescue deal will enable Hon Hai to make use of Sharp’s advanced liquid-crystal display technology and expand its business. Sharp aims to mass-produce next-generation organic light-emitting diode displays, which analysts say could be used in future iPhone models. Sharp board members approved making changes to the rescue plan on Wednesday.
Losses at its liquid-crystal display business have raised the need for Sharp to improve its finances.
On Wednesday, Sharp cut its earnings outlook for the current business year ending Thursday, projecting an operating loss of ¥170 billion on sales of ¥2.45 trillion. It previously forecast an operating profit of ¥10 billion on ¥2.7 trillion in sales.