Sharp, Fox­conn chiefs to meet af­ter takeover deal put on hold

The Pak Banker - - COMPANIES/BOSS -

The chief ex­ec­u­tives of Sharp Corp (6753.T) and Fox­conn plan to meet on Fri­day in China, a per­son fa­mil­iar with the mat­ter said, a day af­ter the world's largest con­tract maker of elec­tronic goods put its takeover of the Ja­panese firm on hold.

Shares in Sharp slid 11 per­cent on Fri­day af­ter sources said pre­vi­ously undis­closed li­a­bil­i­ties were re­spon­si­ble for the last-minute hitch. Just hours af­ter the loss-mak­ing dis­play maker an­nounced it had de­cided to sell a two-thirds stake to Fox­conn, the Tai­wanese firm said it would not sign the deal un­til it had clar­i­fied some "new ma­te­rial in­for­ma­tion" from Sharp. It did not elab­o­rate.

The 11th hour de­lay de­spite an an­nounce­ment - rarely heard of in ma­jor M&A talks - has thrown into doubt Fox­conn's quest to gain Sharp's ad­vanced screen tech­nol­ogy and strengthen its hand with ma­jor client Ap­ple Inc (AAPL.O).

A deal was also sup­posed to have sig­naled the open­ing up of Ja­pan's in­su­lar tech sec­tor to for­eign in­vest­ment.

Sharp had con­tin­gent li­a­bil­i­ties of around 300 bil­lion yen ($2.7 bil­lion), three sources fa­mil­iar with the mat­ter said. That con­trasts with Fox­conn's own due dili­gence which had re­vealed li­a­bil­i­ties of only just un­der 100 bil­lion yen, one of the sources said. The sources, who de­clined to be iden­ti­fied due to the sen­si­tiv­ity of the mat­ter, did not elab­o­rate on the na­ture of the li­a­bil­i­ties. Reuters has not seen any doc­u­ments re­gard­ing the new in­for­ma­tion.

Sharp said in a state­ment on Fri­day that it has been dis­clos­ing its con­tin­gent li­a­bil­i­ties prop­erly. A spokesman for Fox­conn de­clined to com­ment on the is­sue. Sharp also de­clined to com­ment on the planned meet­ing be­tween Fox­conn founder Terry Gou and Sharp CEO Kozo Taka­hashi.

Jef­feries an­a­lyst Atul Goyal said the en­tire deal was in jeop­ardy. "This is es­pe­cially so given the dra­matic back and forth that hap­pened be­tween Sharp and Fox­conn in 2012, when Fox­conn agreed to ac­quire a stake in Sharp but then later walked away," he wrote in a note to clients. Sharp's cred­i­tor banks have also said they were also not aware of the size of the con­tin­gent li­a­bil­i­ties un­til the last minute, sep­a­rate sources fa­mil­iar with mat­ter said. Mizuho Fi­nan­cial Group Inc's (8411.T) Mizuho Bank said it could not yet com­ment while a rep­re­sen­ta­tive for Mit­subishi UFJ Fi­nan­cial Group Inc's (8306.T) core unit Bank of Toky­oMit­subishi UFJ was not im­me­di­ately avail­able for com­ment.

The plunge in Sharp shares added to losses a day ear­lier that came as planned share di­lu­tion un­der the deal looked larger than ex­pected. The stock has lost nearly a quar­ter of its value over the past two days. Fox­conn's shares were, how­ever, lit­tle af­fected on Fri­day, edg­ing down just 0.6 per­cent.

In a 31-page fil­ing, Sharp said it would is­sue around $4.4 bil­lion worth of new shares to give Fox­conn a two-thirds hold­ing. Fox­conn's in­vest­ment is set to to­tal more than 650 bil­lion yen ($5.8 bil­lion), a source fa­mil­iar with the mat­ter has said. Gou has spent roughly five years court­ing Sharp and if a deal does go through, it would boost Fox­conn's po­si­tion as Ap­ple's main con­tract man­u­fac­turer.

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