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Peter Holden
Guest
While cheaper LCD panels are generally good news for the consumer, it has been one of the main contributing factors for the financial woes of electronics manufacturer, Sharp, with the company racking up around $4.5 billion in debt. Sharp’s search for new investment had culminated in an announcement that the Japanese electronics manufacturer had accepted a $6.2 billion takeover bid from Taiwan’s Hon Hai Precision Industry, more commonly known as Foxconn. Everything was going swimmingly until the most recent statement by Foxconn which has cast doubt over the deal being completed.
Sharp had accepted Foxconn’s $6.2 billion bid over a state-backed rival that promised to restructure the company. However, this one paragraph statement from Foxconn (courtesy of Bloomberg) means that the deal could well be scrapped, or at the very least, renegotiated.
“We acknowledge receipt of a notice today from Sharp’s board choosing us as their preferred partner. After receiving new material information from Sharp yesterday morning, we have accordingly informed Sharp last night (before their board meeting on 2/25) that we will have to postpone any signing of a definitive agreement until we have arrived at a satisfactory understanding and resolution of the situation.”
According to the Wall Street Journal, this new information apparently pertains to a list of “contingent liabilities” worth around 350 billion yen (around $3.1 billion). Whichever currency you prefer, that’s a lot of money, and it’s understandable that Foxconn requires further clarification on the matter before deciding to proceed with the takeover.
If Foxconn back out of the deal, it could see Sharp re-examine the deal offered by Japan’s Innovation Network Corp. to spin off Sharp’s businesses in an attempt to restructure and return to profit.
Foxconn has attempted to purchase Sharp numerous times over the past few years. So, what does Foxconn want with Sharp? Well, Sharp has a factory dedicated to producing displays for Apple, which along with its other panel production facilities, would make Foxconn one of the world’s largest manufacturers of smartphone and tablet screens. The amalgamation of Sharp’s assets would help Foxconn achieve further efficiencies, resulting in reduced costs. Of course, all of this is up in the air until this latest wrinkle is smoothed out.
Source: Nikkei, Bloomberg
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