SHCAY Sharp Corporation (PK)

By Takashi Mochizuki 

TOKYO -- IPhone assembler Foxconn Technology Group completed its $3.8 billion deal to buy electronics maker Sharp Corp. on Friday, setting the stage for Taiwanese tycoon Terry Gou to rework the troubled Japanese company.

Osaka-based Sharp said it received a Yen388.8 billion ($3.81 billion) cash infusion from Foxconn, formally known as Hon Hai Precision Industry Co., on Friday. In return, the Taiwanese contract electronics assembler assumed a 66% stake in Sharp.

Sharp's chief executive, Kozo Takahashi, resigned Friday, with Mr. Gou's right-hand man, Tai Jeng-wu, set to step in. Sharp's board met Saturday and named him the new chief executive.

The series of actions represented the long-delayed denouement of a deal that began to take shape early this year as Sharp teetered because of big losses. Foxconn, which prospered by assembling products such as Apple Inc.'s iPhone, saw in the century-old Japanese company a chance to expand to branded electronic goods and build a bigger business with Apple. Sharp supplies display panels for major smartphone makers including Apple.

After nearly reaching a deal in early February, last-minute hitches emerged and Mr. Gou spent a month negotiating a lower price. Then, after the sides agreed on terms in late March, they couldn't close the deal because a review by Chinese antitrust authorities dragged on longer than expected. Beijing finally gave the go-ahead on Thursday.

With the deal complete, Sharp faces changes. Mr. Gou has improved profitability at a Sharp display factory in Japan that he has operated for several years through a joint venture, and he has signaled job cuts are in store at Sharp. Also, analysts say melding the corporate cultures may be a challenge as Sharp employees come to terms with the army-like atmosphere at their new Taiwanese parent.

Sharp is known for innovative consumer-electronic products such as microwave ovens, air purifiers and, more recently, a robot-smartphone hybrid called Robohon. But it ran into financial trouble as its consumer-electronics business encountered new Asian competition and as it became too reliant on the volatile display-panel business for growth. Price pressure from South Korean and Chinese rivals worsened Sharp's standing.

Foxconn hopes to leverage Sharp's assets to diversify its business portfolio, as its core electronics-manufacturing service offers razor-thin profit margins. When times are good, display panels can offer wider profit margins, and Mr. Gou has said he would accelerate Sharp's efforts to produce organic light-emitting diode, or OLED, displays.

South Korean companies have the lead in OLED displays, which could offer more flexibility and energy efficiency than today's standard liquid-crystal displays. Apple is expected to adopt OLED for some iPhones and iPads as early as next year, analysts say. Foxconn's backing of Sharp could threaten other Apple suppliers including struggling Japan Display Inc ., given Mr. Gou's familiarity with the Apple business.

Sharp said it has lined up Yen150 billion in credit from its main lenders, the core banking units of Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc. The commitments were requested by Foxconn as a requirement of the takeover deal.

Japan Industrial Solutions Co., a fund that had a stake in Sharp and representation on the board, sold the holding at a 12% premium to face value, said Sharp, which remains listed on the Tokyo Stock Exchange.

Write to Takashi Mochizuki at takashi.mochizuki@wsj.com

(END) Dow Jones Newswires

August 15, 2016 02:48 ET (06:48 GMT)

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