Hon Hai in talks with Sharp over bigger stake, lower price

Tue Aug 7, 2012 6:11am EDT
 
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By Clare Jim and Tim Kelly

TAIPEI/TOKYO (Reuters) - Taiwan's Hon Hai Precision Industry (2317.TW: Quote) said it was in talks with Sharp Corp (6753.T: Quote) about buying a bigger stake in the struggling Japanese TV maker and paying less per share as part of a renegotiated investment deal between the two Apple Inc (AAPL.O: Quote) suppliers.

Sharp's deteriorating earnings outlook has battered its share price and allowed Hon Hai to squeeze Japan's TV pioneer for a better deal than the one agreed in March, under which it would buy around a tenth of Sharp for $844 million, or 550 yen per share. On Tuesday, Sharp closed at 183 yen.

"Without Hon Hai's money, Sharp is in danger of bankruptcy," said Pelham Smithers, managing director of a London-based market research firm of the same name. "It's just a matter of what terms Hon Hai is able to extract."

At Sharp's current market value, Hon Hai's planned investment could buy it a third of the Japanese firm's stock.

"A bigger stake and price cut are both being discussed, but we need to do it step by step," Hon Hai spokesman Simon Hsing told Reuters on Tuesday. "We first need to work on a joint statement to tell investors whether we need to honor the original obligation."

The two companies will issue a joint statement later this week, he added. Hon Hai on Friday said Sharp had released it from the terms of the original, but Sharp on Monday insisted the deal stood. Sharp declined to comment on Tuesday.

LESS MONEY

Analysts have said Sharp will likely have to accept less money from Hon Hai or sell a bigger stake to the Taiwanese firm, ceding more management control that could see TV assembly plants closed and solar panel and appliance units sold off.   Continued...

 
A security guard patrols at Hong Hai headquarters in Tucheng, Taipei county, June 8, 2010.REUTERS/Pichi Chuang