Foxconn keeps quiet over S$7.4b Sharp bid

TAIPEI — Taiwan’s Foxconn Technology Group has offered about ¥600 billion (S$7.4 billion) to buy struggling Japanese electronics maker Sharp Corp, according to a person familiar with the talks, in what could mark the largest acquisition since 2009 for the assembler of Apple’s iPhones.

A decision to accept or reject the bid is expected before the end of this month, said the person, asking not to be identified as the discussions are private. Mr Chu Wen-min, a spokesman for Foxconn’s Hon Hai Precision Industry, declined to comment.

The world’s largest electronics contract manufacturer offered to invest in Sharp in 2012, but discussions foundered after they failed to agree on management control. Talks were said to have been revived in the past year after Sharp turned to government-backed Innovation Network Corp of Japan (INCJ) for funding as a new round of debt payments loomed.

Foxconn is interested in expanding its business beyond assembly of products and logistics, by adding a wider array of components to its offerings. Sharp, one of the world’s largest makers of displays for smartphones and tablets, could gain more business from Apple and other Foxconn customers such as Amazon.com and Xiaomi.

“There need to be core products around which Sharp can build a market position. What those will be isn’t clear, regardless of which side they join,” said Mr Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management in Tokyo. Shares in the embattled electronics maker surged as much as 25 per cent in Tokyo before closing 6 per cent higher yesterday, taking its market value to about ¥218 billion. The stock dropped 53 per cent last year and 20 per cent in 2014.

Sharp was saddled with total debt of ¥791.8 billion as of Sept 30, according to data compiled by Bloomberg. The Osaka-based company has booked more than ¥1.1 trillion in losses over the past four financial years as stiffer competition from South Korean and Chinese rivals undercut its business.

Apart from Foxconn, it is now also pondering a competing bid from INCJ.

Sources have told Reuters that INCJ is in the lead to rescue Sharp and plans to merge its LCD business with rival Japan Display, in which the fund already has a major stake. The fund is also considering merging Sharp’s home appliances business with Toshiba Corp’s, sources have also said. Media reports have said the fund is offering ¥300 billion in a bailout, and sources have said such a bailout would also involve Sharp’s lenders offering at least ¥200 billion by converting debt to equity.

Government officials have told Reuters that they prefer a Japanese buyer because they want Sharp’s display technology to stay in Japan. “We’re talking with several companies about the structural improvement of liquid-crystal-display business. We don’t comment on the details of individual talks,” said Sharp spokesman Yoshifumi Seki.

In 2012, Foxconn had offered ¥66.9 billion for a 9.88 per cent stake in Sharp. At US$5.1 billion (S$7.3 billion), a full takeover of Sharp would be the largest for Terry Gou’s Foxconn group since the 2009 acquisition by display-making unit Innolux Corp of Chi Mei Optoelectronics for US$5.3 billion plus debt. AGENCIES