OSAKA – Struggling Sharp Corp. is entering a crucial stage in its negotiations over its planned capital alliance with Hon Hai Precision Industry as the chief of the Taiwanese business partner is slated to meet with Sharp’s president next week.
Hon Hai Chief Executive Officer Terry Gou is expected to arrive in Japan to negotiate the amount and ratio of investment in Sharp, while the cash-strapped Japanese electronics maker is accelerating efforts to reduce personnel and restructure in order to receive loans from banks.
The two announced in March that Hon Hai would obtain a 9.9 percent stake in the Japanese manufacturer for ¥550 per share to become Sharp’s leading shareholder, while Sharp had eyed gaining ¥66.9 billion through the tieup and strengthening its financial standing.
But the two companies are now being forced to review the terms of their earlier agreement as Sharp’s stock price has since plummeted to less than half of the planned ¥550 after it reported huge losses for the 2011 business year, which ended in March.
Sharp is seeking to avoid increasing Hon Hai’s say in the company by keeping its investment ratio the same even after the review, although some have called for raising it to around 20 percent.
Instead, Sharp is expected to accommodate selling a stake at around ¥200 per share. The stock finished trading at ¥192 on Friday, up ¥10 from Thursday.
As slashing the share sales price would mean a decline in the amount of funds Sharp can secure through the capital tieup, the company has requested support from Japanese commercial banks.
Once Hon Hai and Sharp finalize the capital alliance agreement, Sharp’s main creditor banks — Mizuho Corporate Bank and Bank of Tokyo Mitsubishi UFJ — are expected to provide further financial aid in addition to the already provided ¥66 billion and ¥200 billion in loans currently under consideration.
A Sharp executive, however, said the company will keep borrowing to a minimum by selling assets.
Sharp is arranging to sell its television assembly plants in Nanjing, China, and Mexico to Hon Hai, while considering spinning off its key plant in Kameyama, Mie Prefecture, which produces liquid crystal display panels for smartphones.
Also under consideration are plans to sell off operations for air conditioners and copiers, downsizing domestic television assembly, and selling its stockholdings in other manufacturers as part of its restructuring efforts. More than 8,000 jobs may be slashed worldwide in the process.
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