OSAKA – Taiwan’s Hon Hai Precision Industry Co. is considering cutting its takeover bid for ailing Sharp Corp. by ¥100 billion ($895 million) to ¥200 billion, sources familiar with the matter said Tuesday.
Hon Hai, better known by its trade name Foxconn, is weighing the change to reflect future financial risks facing Sharp, the sources said, raising the possibility its bid could end up being lower than the ¥300 billion offered by the Innovation Network Corporation of Japan, a state-backed fund.
Hon Hai’s bid includes a ¥489 billion cash infusion.
The company is also asking Sharp to drop its request for a ¥100 billion deposit, the sources said. Before Sharp’s board voted in favor of Hon Hai’s takeover offer at its Feb. 25 meeting, some within Sharp had reservations about dealing with Hon Hai after a 2012 capital tie-up agreement broke down.
The signing of the latest deal has been put on hold following what Hon Hai said was a last-minute disclosure from Sharp. Hon Hai said it would need time to review Sharp’s financial standing after the money-losing electronics giant submitted a new document detailing its contingent liabilities to Hon Hai a day before the board met to vote.
Hon Hai is offering ¥118 a share for Sharp, but might lower that while seeking to acquire around 66 percent ownership in the company, the sources said.
The Apple Inc. supplier is asking Sharp’s creditor banks — Mizuho Bank and the Bank of Tokyo-Mitsubishi UFJ — to agree to lend ¥300 billion. It is also considering putting off its purchase of their ¥100 billion of preferred shares in Sharp, the sources said.
Sharp’s board must approve any potential change in the takeover price.
Reeling from losses at its liquid crystal display business caused by stiff competition with foreign rivals, Sharp urgently needs to improve its finances.
The Osaka-based company faces a deadline at the end of the month to repay loans worth around ¥500 billion.