Sharp, Foxconn Aim to Seal the Deal by Next Week
March 03 2016 - 11:30PM
Dow Jones News
Foxconn Technology Group doesn't plan to adjust its planned ¥
489 billion ($4.30 billion) investment in embattled Japanese
consumer-electronics company Sharp Corp. but terms for creditors
could be revised as negotiations continue, people familiar with the
matter said.
The two companies aim to seal a near $6 billion deal early next
week after one more round of negotiation, the people said. Foxconn
and Sharp are optimistic that the Japanese company's recent
disclosure of an additional ¥ 350 billion in contingent liabilities
or potential financial risk, won't derail the deal, the people
said.
Since Monday, Foxconn and Sharp have deployed hundreds of people
across all of Sharp's locations to study the latest list of
financial risk, the people said. The teams have been meeting around
the clock and late into the night to determine whether the new
risks are acceptable, the people said.
A Sharp spokesman said negotiations are continuing with Foxconn
and declined to comment when asked whether the company's board
would need to meet again to approve revised deal terms.
Foxconn didn't immediately reply to a request for comment.
Battered by price declines in smartphone screens, Osaka-based
Sharp decided last week to accept a takeover offer from Foxconn,
known formally as Hon Hai Precision Industry Ltd. But the Taiwanese
company, which assembles Apple Inc.'s iPhones, paused to seal the
deal, saying it needed more time to review important information
that Sharp disclosed at the last minute of negotiations.
People familiar with the matter said earlier Sharp had disclosed
more than 100 items of contingent liabilities including possible
tax claims by the Japanese government, intellectual-property
lawsuits and potential damages from patent infringement claims
against Sharp.
Sharp faces a March 31 deadline to repay a total of ¥ 510
billion in borrowings. Main lenders need Sharp to reach an
agreement on the takeover deal before renewing the loans, bankers
said.
Under the deal outlined by Sharp last week, it would issue new
shares to Foxconn in exchange for an infusion of ¥ 489 billion.
Sharp said Foxconn would purchase preferred shares held by two
creditors—the core banking units of Mizuho Financial Group Inc. and
Mitsubishi UFJ Financial Group Inc.—for ¥ 100 billion.
Other payments that people familiar with the matter said would
total about ¥ 70 billion would bring the total commitment by
Foxconn to ¥ 659 billion, or $5.80 billion.
It wasn't immediately clear how much Foxconn is willing to pay
creditors for the preferred shares under revised terms.
Foxconn's offer was double what a government-backed Japanese
fund—Innovation Network Corp. of Japan—was offering and included
relief for Sharp's two main banks, which are saddled with the
company's debt.
The deal is being watched closely not just because of its
implications for Japan's reputation for protecting its prized
industrial names from foreign ownership, but because it also could
mark a passing of the technological generations: 103-year-old Sharp
was a pioneer of the modern television set in Japan; Foxconn,
founded more than four decades ago, has grown into a $120 billion
behemoth thanks to its proficiency in assembling smartphones.
Eva Dou in Beijing contributed to this article.
Write to Takashi Mochizuki at takashi.mochizuki@wsj.com and
Wayne Ma at wayne.ma@wsj.com
(END) Dow Jones Newswires
March 03, 2016 23:15 ET (04:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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