TOKYO

The Pak Banker - - COMPANIES/BOSS -

Sharp Corp.'s lawyers are rec­om­mend­ing that two board mem­bers be ex­cluded from a fi­nal vote on com­pet­ing bailout plans, pos­si­bly tip­ping the bal­ance in fa­vor of a pro­posal from In­no­va­tion Net­work Corp. of Ja­pan, peo­ple with knowl­edge of the mat­ter said.

Masahiro Su­mita and Shinichi Saito, sup­port­ers of a bid from Fox­conn Tech­nol­ogy Group, face a po­ten­tial con­flict of in­ter­est be­cause they work at Ja­pan In­dus­trial So­lu­tions Ltd., a holder of Sharp pre­ferred stock, the peo­ple said, ask­ing not to be iden­ti­fied as the in­for­ma­tion is pri­vate. Sharp's board could make a fi­nal de­ci­sion on the res­cue plans as early as Satur­day, one of the peo­ple said.

Sad­dled with debt and strug­gling with chronic losses, the board of the cen­tury-old con­sumer elec­tron­ics maker has to de­cide be­tween INCJ's plan to re­struc­ture by spin­ning off busi­nesses or stay­ing as one un­der a for­eign par­ent with Tai­wan's Fox­conn. Sharp's fate is re­garded as a test case of Ja­pan's will­ing­ness to em­brace over­seas in­vestors.

The board is di­vided ahead of Fox­conn's Feb. 29 dead­line, with each side win­ning the sup­port of at least four of the 13 di­rec­tors, sep­a­rate peo­ple said ear­lier this week.

Sharp's Ger­man-traded shares rose as much as 9 per­cent on Wed­nes­day. The stock closed 3.3 per­cent higher at 156 yen in Tokyo.

Fox­conn's 660 bil­lion yen ($5.8 bil­lion) pro­posal in­cludes an of­fer to buy pre­ferred stock held by Mit­subishi UFJ Fi­nan­cial Group Inc. and Mizuho Fi­nan­cial Group Inc. in Sharp, peo­ple fa­mil­iar with the mat­ter have said. INCJ's plan in­cludes in­ject­ing 300 bil­lion yen of cash, as­set sales by Sharp and get­ting the com­pany's banks to can­cel shares they own, ac­cord­ing to doc­u­ments ob­tained by Bloomberg News.

"Fox­conn's bid for Sharp is clearly su­pe­rior. The com­pe­ti­tion's of­fer re­mains much lower in terms of money for Sharp," Fox­conn said in an emailed state­ment. "We have a plan that the Sharp board knows we are pre­pared to im­me­di­ately im­ple­ment to make Sharp prof­itable and re­turn it to its po­si­tion as a global tech­nol­ogy leader."

Toy­odo Ue­mura, a spokesman for Sharp, de­clined to com­ment. Ken­jiro Kobayashi, a spokesman for JIS, de­clined to com­ment. JIS de­clined to make the two Sharp di­rec­tors avail­able for com­ment. Mizuho and Mit­subishi UFJ are ma­jor share­hold­ers of Ja­pan In­dus­trial So­lu­tions, own­ing 14.9 per­cent each. The in­vest­ment fund, where Su­mita is chair­man and Saito the pres­i­dent, spe­cial­izes in fi­nanc­ing of cor­po­rate turn­arounds. It bought 25 bil­lion yen of Sharp pre­ferred stock last year, ac­cord­ing to a fil­ing.

Sharp hasn't made a de­ci­sion yen on whether to ex­clude the two di­rec­tors, the peo­ple said. Fox­conn's bil­lion­aire chair­man, Terry Gou, flew to Ja­pan ear­lier this month to per­son­ally ap­peal to the board, shortly af­ter Sharp Chief Ex­ec­u­tive Of­fi­cer Kozo Taka­hashi said he planned to take an­other month to choose be­tween Fox­conn and INCJ. Gou said Feb. 5 that ne­go­ti­a­tions are 90 per­cent com­plete and a fi­nal agree­ment is ex­pected by the end of Fe­bru­ary. INCJ es­ti­mates its to­tal pack­age is worth about 1 tril­lion yen, in­clud­ing Sharp sell­ing its stake in Sakai Dis­play Prod­ucts Corp. and fi­nanc­ing from lenders, the doc­u­ments pre­sented to Sharp show.

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