Ja­pan fund to pitch Sharp for ap­pli­ance gi­ant

The Pak Banker - - COMPANIES/BOSS -

In­no­va­tion Net­work Corp. of Ja­pan is mak­ing the case to Sharp Corp. that its res­cue pro­posal for the elec­tron­ics maker is worth more than an of­fer from Fox­conn Tech­nol­ogy Group, a sign the govern­ment fund is de­ter­mined to keep fight­ing for vic­tory in the takeover bat­tle.

The state-backed fund pro­posed a pack­age of cash, as­set sales and sup­port from lenders that it says is worth 1 tril­lion yen ($8.5 bil­lion), ac­cord­ing to doc­u­ments INCJ pre­sented to Sharp and ob­tained by Bloomberg News. Fox­conn is of­fer­ing about 660 bil­lion yen for the com­pany, a per­son fa­mil­iar with the mat­ter has said.

INCJ's pro­posal in­cluded a 300 bil­lion yen cash infusion for Sharp as well as 350 bil­lion yen in sup­port from its lenders, ac­cord­ing to the doc­u­ments. The fund also pro­posed rais­ing 150 bil­lion yen from its stake in Sakai Dis­play Prod­ucts Corp. and 200 bil­lion yen in fi­nanc­ing.

"Money mat­ters, but what's im­por­tant is the com­pany's longterm vi­a­bil­ity," said Ya­suaki Kogure, chief in­vest­ment of­fi­cer at SBI As­set Man­age­ment Co. "Be­yond the money amounts, the ques­tions that need an­swer­ing are about Sharp's re­struc­tur­ing." Sharp fell 1.7 per­cent to 174 yen as of 9:16 a.m. in Tokyo on Tues­day, com­pared with a 3.9 per­cent drop in the Nikkei 225 Stock Av­er­age. The stock gained 27 per­cent last week.

Fox­conn Chair­man Terry Gou emerged from a nine-hour meet­ing with Sharp on Fri­day and said his com­pany has be­come the pre­ferred bid­der, with a fi­nal agree­ment ex­pected by the end of the month. About an hour later, the Osak­abased com­pany con­tra­dicted his com­ments, say­ing that INCJ's bid is still in play.

INCJ has not given up on the pro­posal and is not plan­ning to raise its of­fer, the fund's Chief Ex­ec­u­tive Of­fi­cer Toshiyuki Shiga said in an in­ter­view with Nikkei news­pa­per on Mon­day. INCJ's fo­cus is on re­struc­tur­ing and not re­vival makes its plan fun­da­men­tally dif­fer­ent from Fox­conn's, Shiga said in the re­port. "There needs to be a board de­ci­sion to give a pre­ferred ne­go­ti­at­ing part­ner sta­tus," At­sushi Yoshida, a spokesman for Sharp, said fol­low­ing Gou's com­ment on Fri­day. "The board meet­ing yes­ter­day didn't yield such sta­tus and there was no meet­ing to­day. We plan to con­tinue our talks with INCJ."

Toy­odo Ue­mura, a spokesman for Sharp, de­clined to com­ment. Ne­go­ti­a­tions with Sharp are con­tin­u­ing, a spokesman at INCJ said. Fox­conn de­clined to com­ment. The len­der sup­port in INCJ's pro­posal would in­clude a 110 bil­lion yen debt-for-equity swap, the doc­u­ments show. Mit­subishi UFJ Fi­nan­cial Group Inc. and Mizuho Fi­nan­cial Group Inc. would also can­cel 225 bil­lion yen of pre­ferred stock they hold in Sharp, shares Fox­conn is of­fer­ing to buy, ac­cord­ing to INCJ's plan.

INCJ pro­posed merg­ing Sharp's liq­uid crys­tal dis­play op­er­a­tions with those of Ja­pan Dis­play Inc., where the fund is a ma­jor share­holder, ac­cord­ing to the doc­u­ments. The fund's of­fer will re­flect fair value of Sharp's stock, pre­vent­ing pos­si­ble share­holder law­suits and also in­volve bring­ing in new man­age­ment, ac­cord­ing to the doc­u­ments.

Gou has pushed hard for a deal even as it looked un­likely he would win. Sharp had been in­clined to take the bid from INCJ, peo­ple fa­mil­iar with the mat­ter said last month. But then Gou raised his bid from 600 bil­lion yen to about 660 bil­lion yen and flew to Ja­pan to make a per­sonal ap­peal to Sharp's board, its banks and govern­ment of­fi­cials, a per­son fa­mil­iar with the mat­ter has said.

Fox­conn's ne­go­ti­a­tions with Sharp are 90 per­cent com­plete, Gou told re­porters on Fri­day out­side Sharp head­quar­ters. There will be no breakup of the com­pany, he said, echo­ing com­ments from Sharp Chief Ex­ec­u­tive Of­fi­cer Kozo Taka­hashi a day prior.

In­no­va­tion Net­work Corp. of Ja­pan is pitch­ing Sharp Corp.'s board on plans to cre­ate a Ja­panese smart home-ap­pli­ances gi­ant, as the state-backed fund seeks sup­port for its bailout bid over a ri­val of­fer from an over­seas bid­der, peo­ple with knowl­edge of the mat­ter said. INCJ, which has of­fered to in­ject about 300 bil­lion yen ($2.6 bil­lion) of new funds into Sharp, aims to use about 100 bil­lion yen of that amount for ac­qui­si­tions of other do­mes­tic ap­pli­ance busi­nesses, one of the peo­ple said.

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