Taiwan's Foxconn Offers $5.3 Billion to Take Over Sharp

Foxconn, the Taiwanese company that assembles the bulk of the world's iPhones, has offered about ¥ 625 billion ($5.3 billion) to take over troubled Japanese electronics maker Sharp Corp., according to people familiar with the matter.

Sharp, which has been bailed out repeatedly by banks, is set to review a competing offer from Innovation Network Corp. of Japan, a government-backed investment fund. The Nikkei newspaper reported this week that the fund was weighing a bid that could top ¥ 300 billion. It wasn't clear whether the bid would require Sharp's main creditors to swap some of their debt for equity.

Japanese officials have expressed concern about letting Sharp come under foreign control, citing the company's technology in display panels. Innovation Network Corp. of Japan already owns a controlling stake in Japan Display Inc., another major display maker. Officials say the two Japanese panel makers share know-how in next-generation panel technology and mass production.

"Japan's technology is leading the rest of the world and we would like to help make it even more competitive," industry minister Motoo Hayashi said this week.

Foxconn, formally known as Hon Hai Precision Industry Co., is offering more money for Sharp and a willingness to shoulder all of its debt, people familiar with the offer said. Those conditions are meant to persuade Sharp's creditors to make a decision based on the economics of the deal, rather than political considerations, one person familiar with the matter said.

Sharp faces a March due date for repaying a total of ¥ 510 billion in borrowings, according to Standard & Poor's. Sharp has said its main creditors are banking units of Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc.

Foxconn has no plans to replace Sharp's top management, people familiar with the offer said, a step meant to reassure Japanese officials worried about a foreign takeover. They said Sharp and its lenders hope to reach a decision by Feb. 4, when Sharp is scheduled to announce its latest quarterly results.

Foxconn and Sharp declined to comment. INCJ couldn't immediately be reached for comment.

Sharp, which makes everything from televisions to solar panels to display panels for Apple Inc.'s iPhones, turned to its two main banks in May 2015 for its second rescue in three years. In the fiscal year that ended March 2015, Sharp suffered a net loss of ¥ 222 billion.

Conditions have worsened since then. In its most recent half-year results, it posted an operating loss of ¥ 25.2 billion, citing deteriorating Chinese demand for smartphone displays.

In 2012, Terry Gou, Foxconn's chairman, personally acquired a 38% stake in a Sharp display factory in Sakai, Japan. At the same time, Foxconn agreed to buy a 10% stake in Sharp, but that deal unraveled in 2013 after dismal earnings reports sent Sharp's shares plunging.

Despite Sharp's troubles, the company's display and manufacturing know-how remain attractive to Foxconn, people familiar with the companies said. Also, while Foxconn principally assembles electronics to be sold under other brand names, the Sharp brand could be valuable if Foxconn wants to sell its own products to consumers.

Atsuko Fukase and Eva Dou contributed to this article.

Write to Wayne Ma at [e-mail] and Takashi Mochizuki at [e-mail]

(END) Dow Jones Newswires

January 20, 2016 23:25 ET (04:25 GMT)

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