Foxconn seeks to lower takeover offer for Sharp: sources

Tue Mar 22, 2016 6:00am EDT
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By Taro Fuse

TOKYO (Reuters) - Taiwan's Foxconn aims to lower its offer for Japan's Sharp Corp (6753.T: Quote) by at least around 100 billion yen ($893 million) to account for likely worse than expected annual earnings at the loss-making electronics firm and for newly revealed risks, two sources said on Tuesday.

Sharp late last month said it would issue around $4.4 billion worth of new shares to give Foxconn, formally known as Hon Hai Precision Industry Co (2317.TW: Quote), a two-thirds stake. The investment in Sharp's equity is part of a deal estimated to be worth $5.8 billion.

But the Taiwanese company put its takeover bid on hold at the eleventh hour after the Japanese company revealed previously undisclosed potential liabilities.

It also demanded more information about Sharp's recent business. Sources familiar with the situation said Sharp was likely to book an operating loss in the tens of billions of yen for the fiscal year ending this month, rather than the 10 billion yen profit it had previously forecast.

Sharp pushed back against an earlier, bigger cut of around 200 billion yen proposed by Foxconn, but was is in no position to walk away from the Taiwanese company as it was desperate to secure funds, they said.

Both Foxconn and Sharp declined to comment.

Once a leader in high-end displays for smartphones and TVs, Sharp has struggled as it failed to innovate enough in display technology to fend off pricing pressure from Asian rivals. Two bank bailouts since 2012 did little to help turn its business around.

In choosing to negotiate with Foxconn, Sharp turned down a rival offer by state-backed Innovation Network Corp of Japan (INCJ), at one time seen as the stronger bidder because of government involvement.   Continued...

Workers stand at the gate of a Foxconn factory in the township of Longhua in Shenzhen, Guangdong province in this May 26, 2010 file photo.    REUTERS/Stringer/Files