TOKYO — For a few hours on Thursday, it looked like Sharp, the ailing Japanese consumer electronics company, had secured a $ 5.5 billion takeover from Foxconn of Taiwan, the giant contract manufacturer that churns out products for Apple and other foreign brands.
But later in the afternoon, Foxconn balked, saying it had already told Sharp it needed to review last-minute disclosures before committing.
The door remains open for a deal, which would be the largest acquisition of a Japanese technology company by an overseas buyer. For now though, an agreement between the companies hangs in the balance, with Foxconn saying in a statement that it was examining "new material information" that Sharp provided on Wednesday.
The companies had hoped to sign a deal after Sharp's board voted Thursday morning to accept Foxconn's offer. Foxconn said it had told Sharp on Wednesday night, before the board vote, that it "will have to postpone any signing of a definitive agreement until we have arrived at a satisfactory understanding and resolution of the situation."
Sign Up for the DealBook Newsletter
Every weekday, twice a day, get the news driving the markets and the latest on mergers and acquisitions.
It was unclear exactly what the disclosures were or whether they posed a significant threat to the deal.
Nicholas Benes, a Tokyo-based specialist in Japanese corporate governance, said Sharp's plans to issue new shares as part of the deal would require an especially thorough disclosure of the company's contingent liabilities — potential future costs related to business contracts or financial forecasts, for example.
"The rules are stricter when you're issuing new shares," he said. "Maybe Foxconn found something they didn't like, or maybe there's just a lot to go through."
Foxconn and Sharp have stumbled over deals in the past.
Foxconn's billionaire founder, Terry Gou, bought a minority share in an underused Sharp LCD factory in western Japan in 2012. At the time, Foxconn also planned to buy a stake in Sharp itself, but that part of the deal fell apart over a price disagreement.
Sharp's share price dropped 14 percent on Thursday after Sharp announced the details of the proposed Foxconn buyout. The large issue of new shares planned by Sharp would dilute the value of existing investors' stakes.
Under the plan accepted by Sharp on Thursday, Foxconn would pay just under 500 billion yen, or about $ 4.5 billion, for new shares, giving it control of two-thirds of the company's voting stock. It would also acquire ¥100 billion of nonvoting preferred shares that are held by banks that have extended loans to Sharp, plus another ¥25 billion in shares held by a private investment fund.
Sharp's board chose Foxconn over a government-backed investment fund that also sought control of the company, but offered less money. The contest was widely seen as a proxy for a larger economic struggle, one between government-led industrial policy and the forces of an open global market.
The government fund, the Innovation Network Corporation of Japan, has been trying to rescue Japan's shrinking television and smartphone display industry — or at least keep it in local hands — by buying up display businesses and combining them into a single national champion.
But the sale of Sharp, the largest Japanese maker of liquid crystal displays, to a foreign company would represent a setback for that effort.
Sharp indicated this month that it was leaning toward Foxconn, which was offering twice as much cash as the government fund.
Innovation Network offered to invest ¥300 billion in Sharp. It said the real value of its bid was larger, however, because it would have been able to use its influence with Japanese banks to get more funding. Emergency loans from the banks have kept Sharp afloat as its business has deteriorated in recent years.
Sharp has lost about $ 10 billion over the last half-decade as foreign rivals have grabbed its market share and the price of LCDs has plunged. It reported a net loss of ¥24 billion last quarter.
Until this month, Innovation Network was widely seen as the company's most likely savior. In 2012, Innovation Network combined the LCD businesses purchased from Toshiba, Hitachi and Sony into a new company, Japan Display. The company has struggled, however, and its backers had hoped that adding Sharp's production volume would make it more competitive.
Foxconn, also known as Hon Hai Precision Industry, owns vast contract manufacturing operations in China but has been seeking to expand into new areas.
No comments:
Post a Comment