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Foxconn said near finalising deal approved by Sharp's board

Friday, March 4, 2016 - 14:15

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Foxconn Technology Group and Sharp Corp are aiming to sign their US$6 billion takeover agreement as early as Monday after deciding the deal won't require major changes, according to people familiar with the matter.

[TOKYO] Foxconn Technology Group and Sharp Corp are aiming to sign their US$6 billion takeover agreement as early as Monday after deciding the deal won't require major changes, according to people familiar with the matter.

The two sides have been going through a list of potential liabilities and concluded they will be much less than initial concerns they could exceed 300 billion yen (S$3.6 billion), said the people, who asked not to be identified because the matter is private. That would pave the way for Foxconn to proceed with its proposed deal of paying about 500 billion yen for a majority stake in Sharp, along with additional payments for preferred shares.

Foxconn Chairman Terry Gou has pursued Sharp since at least 2012 and had appeared on the verge of grasping his prize when the Japanese company's board approved his deal last week. But Foxconn a few hours later said it would postpone the final agreement until it had got to the bottom of material new information provided by Sharp just a day earlier.

That information is about contingent liabilities that the company could incur through layoffs or restructurings, people familiar with the matter have said.

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DWINDLING CASH

Sharp has been losing money for years and its need for financial support set off the takeover battle last year between Foxconn and the government-backed Innovation Network Corp of Japan.

The company's cash totaled 208.5 billion yen at the end of December, and it is projected to lose more than 100 billion yen in the fiscal year that ends this month, according to data compiled by Bloomberg.

Sharp also faces the expiration of 510 billion yen in credit lines and loans on March 31. The company's banks have pushed for a bailout agreement before those loans are renewed, people familiar with the matter have said.

The banks, Mizuho Financial Group and Mitsubishi UFJ Financial Group, could finish the renewals by the deadline if Sharp and Foxconn reach final terms next week, said the people.

Terms for Sharp's creditors may be revised from the original takeover agreement, the Wall Street Journal reported on Friday, without specifying what those changes could be.

A spokesman for Foxconn declined to comment. Yoshifumi Seki, a spokesman for Sharp, also declined to comment.

Sharp shares rose 8 per cent to 149 yen at 1.25pm in Tokyo trading.

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