Foxconn's Price Tag for Sharp Likely to Fall by More Than $2 Billion
March 29 2016 - 3:30AM
Dow Jones News
The boards of Sharp Corp. and Foxconn Technology Group will meet
separately on Wednesday to discuss a revised takeover package that
could slash at least 245 billion yen ($2.16 billion) off the price
tag for the troubled Japanese electronics maker, people familiar
with the matter said.
Under the new terms, which people familiar with the matter said
are still under negotiation and could change, Sharp would issue new
shares to Foxconn in exchange for an infusion of ¥ 389 billion for
about a two-thirds stake, down from Foxconn's original offer of ¥
489 billion.
To make up for the shortfall, the people said Sharp's two main
lenders, Mizuho Bank and Bank of Tokyo-Mitsubishi UFJ, would offer
a credit line of ¥ 300 billion to Sharp, which makes everything
from televisions to solar panels to screens for Apple Inc.'s
iPhones.
The two banks, which have held ¥ 200 billion worth of preferred
Sharp shares since they bailed the company out last year, would let
Foxconn delay buying those shares for about three years, the people
said.
Foxconn, known formally as Hon Hai Precision Industry Co.,
originally offered to buy half the shares for ¥ 100 billion.
The people said a side agreement for Foxconn to pay ¥ 45 billion
for the land beneath Sharp's advanced display panel factory in
Sakai, Japan, was canceled, according to the revised terms. The
people said discussions with Sharp's two main lenders over revised
terms for Sharp's ¥ 500 billion in bank debt—such as lowering
interest rates on the loans and lengthening the payback
schedule—are continuing.
Foxconn and Sharp are tentatively planning to announce an
agreement at a news conference that could come as early as
Saturday, people familiar with the matter said.
In a statement, Foxconn said it would hold a regular board
meeting on Wednesday, though discussions about Sharp would depend
on the progress of the negotiations. A Sharp spokesman said it is
working with Foxconn to reach an agreement as soon as possible.
Some Sharp board members, including Chief Executive Kozo
Takahashi, are expected to step down once the deal is approved by
Sharp shareholders in June, one of the people said.
Sharp on Monday announced that Tetsuo Onishi, an executive vice
president in charge of restructuring its display business, will
step down Thursday.
People familiar with the matter said the revised terms came due
to the extra time Foxconn had to conduct due diligence. Over the
past month, Foxconn has sent hundreds of people to take stock of
everything from Sharp's information-technology infrastructure to
its inventories, two of the people said, adding that the teams have
uncovered issues related to factory overcapacity and China sales
that helped to convince Sharp's lenders to agree to revised
terms.
Sharp declined to comment on details of the negotiations,
including what the company has discovered through the due diligence
process.
For the fiscal year ending this month, Sharp is expected to
report a net loss of ¥ 200 billion, people familiar with the matter
said, due to weaker sales of display panels and an extraordinary
one-time loss. In the previous fiscal year, Sharp posted a loss of
¥ 222 billion.
Sharp's board initially approved a package from Foxconn to buy
the floundering Japanese company for ¥ 659 billion in late
February. However, Foxconn left Sharp standing at the altar after
the Taiwanese company received a document from Sharp outlining an
additional ¥ 350 billion worth of contingent liabilities—or
potential future financial risks—that hadn't previously been
disclosed, according to people familiar with the matter.
Atsuko Fukase in Tokyo and Eva Dou in Beijing contributed to
this article.
Write to Wayne Ma at wayne.ma@wsj.com and Takashi Mochizuki at
takashi.mochizuki@wsj.com
(END) Dow Jones Newswires
March 29, 2016 03:15 ET (07:15 GMT)
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