Foxconn and Sharp have agreed a deal, which will see the Taiwanese firm acquire 66% of the Japanese company. The deal has been valued at ¥389 billion ($3.5 billion) – ¥100 billion ($889 million) less than Foxconn’s (reported) original offer.
The total price includes the purchase of both common shares worth ¥289 billion and preferred shares with ¥100 billion. The preferred shares can be converted to common shares starting on the 1st July 2017; such a move would increase Foxconn’s stake in Sharp to 72%.
Agreements between Foxconn and Sharp’s two major lenders – Mizuho Bank and the Bank of Tokyo-Mitsubishi UFJ – were not disclosed. Sources speaking to the Wall Street Journal said that the banks plan to offer Sharp a ¥300 billion ($2.7 billion) credit line, to make up for the lower capital injection. Together, the banks hold ¥200 billion ($1.8 billion) of preferred Sharp shares; they will let Foxconn delay buying half of those shares for three years.
The deal will be signed on the 2nd April, and will mark the first foreign takeover of a major Japanese firm. The government-backed Innovation Network Corporation of Japan (INCJ) had been bidding against Foxconn earlier this year.
Foxconn hopes that the acquisition will enable it to move ‘up the value chain’ and produce smartphone screens for customers. The firm also plans to invest in Sharp in order to expand its production capacity, including OLED capacity. Sharp has said that it will spend two-thirds of Foxconn’s investment on its panel manufacturing technology.
Analyst Comment
See our editorial for comments on this deal. (BR)
