Foxconn has offered to takeover Sharp Corporation. In a bid to acquire Japan’s Sharp, the Taiwanese company is ready to pay more than $5 billion. However, Japan’s officials have expressed their reservations about allowing Sharp to come under foreign control.
Taiwan’s Hon Hai Precision Industry, which is better known around the world by its trade name, Foxconn, has offered about ¥625 billion ($5.3 billion) to take over troubled Japanese electronics maker Sharp Corp. Interestingly, the company doesn’t intend to oust the top management to appease the growing concerns amongst Japanese officials of a foreign takeover. But still, Japanese authorities have so far insisted that Sharp as a company, and more importantly the technologies the company has developed over the years, remain in Japan.
The news about a possible bid from Foxconn hasn’t been cross verified, but Wall Street Journal, which first reported the developments, was able to corroborate the same from people who are familiar with the matter. Shares of Sharp surged more than 20 percent, when shareholders and investors got a whiff of the possible takeover by Foxconn. The Taiwanese manufacturer of electronics, which are commonly referred to as white goods, is one of the most sought-after companies by the world leaders in the segment, to make their products for them.
Foxconn's $5.1 billion bid for Sharp could be good for Apple too https://t.co/n6qW6ZoeXx— Quartz (@qz) January 21, 2016
Foxconn is a leading third-party manufacturer who builds products as per the specifications laid out companies by like Apple. Incidentally, the Taiwanese company is a preferred supplier of electronic components or entire units by many companies across the world. Through cutting-edge assembly plants and skilled workforce, Foxconn has won the trust of tech giants who can focus purely on innovation, while leaving the company with the nitty-gritties of manufacturing.
Meanwhile, Sharp isn’t doing well, reported the Irish Times. Reports indicate the Japanese company has been repeatedly bailed out by the country’s numerous financial institutions. Despite being one of the leaders in display technology, the multi-segment manufacturer of electronics is now struggling to make ends meet and keep its shareholders happy. Incidentally, the Japanese company already has a counter offer.
Sharp appears to be in the process of reviewing a competing offer from Innovation Network Corp. of Japan (INCJ), a government-backed investment fund, reported RTT News. Japan’s Nikkei newspaper had earlier indicated that the counter offer is worth only about ¥300 billion, which, needless to point out, is less than half of what Foxconn is willing to offer.
Though Sharp makes a number of electronics in various segments including, but certainly not limited to, industrial and home automation, Foxconn is clearly interested in the former’s technology in display panels. INCJ, which has a controlling stake in Japan Display Inc., another major display maker, will undoubtedly merge the two businesses. Incidentally, the two rivals already share know-how in next-generation panel technology and mass production. INCJ is also expected to merge Sharp’s home appliances business with Toshiba Corp. This could make INCJ one of the biggest companies not only in Japan, but the world.
While INCJ’s offer is a preferred one as it keeps Sharp within the confines of Japan, Foxconn is willing to offer a lot more money. Interestingly, the Taiwanese maker appears to have shown willingness to shoulder all of its debt, as well.
It is unclear if the decision to allow the takeover bid is left entirely to the shareholders of Sharp, but Foxconn’s offer is clearly aimed at appeasing Sharp’s creditors and persuading them to take a decision that is driven by pure economics, instead of political pressure.
From a financial perspective, Sharp has immediate troubles coming its way. The company has a March due date for repaying a total of ¥510 billion in borrowings, according to Standard & Poor’s. Despite Sharp’s current financial predicament, Foxconn is clearly betting big on the former’s display and manufacturing know-how. Additionally, Foxconn has traditionally assembled goods for other companies. Owning an established and trusted brand like Sharp is strategically important to the company.
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