Foxconn's Sharp deal hits last-minute problem

Sharp's board approved the bid from Foxconn, which is formally known as Hon Hai Precision Industry today, the person familiar with the situation said.

Taiwan's Foxconn Technology Group won a board vote to take control of struggling Japanese electronics maker Sharp Corp. but then said it would postpone signing a definitive agreement because of "new material information".

But the freakish series of events raises questions about why Sharp went ahead and announced the deal if it knew Foxconn was getting cold feet.

Century-old Sharp, which supplies smartphone and tablet screens to Apple but started life making belt buckles and pencils, was once among Japan's leading firms and its brand was internationally recognised.

Foxconn's offer was said to be in jeopardy, though, as Japanese government officials were looking to keep Sharp's technology within the country, and so were favoring the company's buyer to be a fellow Japanese firm.

Whether Apple is involved in the deal or not, it's good news for the Cupertino company. iPhone displays are now manufactured by Sharp, Samsung, and LG, with Foxconn handling the assembly process.

Before Foxconn's statement, Sharp's stock tumbled to end 14 per cent lower as investors anxious that the share dilution from the deal could be larger than ­expected. The fund has said it wants to merge Sharp's display business with Japan Display Inc, in which it is the top shareholder. The deal is worth a total of around US$6 billion, including around US$4.5 billion in new shares and around US$1 billion in preferred shares. But policymakers warmed to Foxconn's offer as a step towards bolstering foreign direct investment in Japan. Foxconn CEO Terry Gou personally acquired 38 percent ownership of a Sharp display factory in Sakai, Japan, back in 2012, although a subsequent deal for Foxconn to purchase a 10 percent stake in the company fell apart.

A takeover by Foxconn, which assembles various electronics products such as smartphones and television sets for the likes of Apple and Sony Corp (6758.T), would vastly expand sales channels for Sharp's liquid crystal display (LCD) panels. The lenders are Mitsubishi UFJ Financial Group's core unit Bank of Tokyo-Mitsubishi UFJ, and Mizuho Financial Group's Mizuho Bank.

Source: Foxconn's Sharp deal hits last-minute problem