Foxconn, Sharp said to weigh revising terms of approved deal
Taiwan's Foxconn Technology Group and Sharp Corp. worked through the weekend to salvage their proposed $6 billion deal with one potential outcome being a revision to terms the Japanese company's board approved just last week, according to people familiar with the matter.
Bankers and lawyers are going through a list of Sharp liabilities that could exceed 300 billion yen ($2.6 billion), a last-minute stumbling block in Foxconn's effort to take control of the struggling Japanese company, according to the people, who asked not to be identified as the talks aren't public. It's too early to tell whether Foxconn will lower the value of its offer for Sharp or change its bid in some other way, said the people. Any material change to the offer would require Sharp's board to vote again on the Foxconn proposal, the people said.
Foxconn Chairman Terry Gou has fought for months to take over Sharp, battling a competing offer from a once-favored domestic bidder, Innovation Network Corp. of Japan. Foxconn offered a package worth in excess of 600 billion yen -- more than twice INCJ's bid -- with most of the money going into Sharp through the purchase of additional shares. Only hours after Sharp's board approved its offer on Thursday, Foxconn said it had received new information from Sharp and wouldn't go through with the deal until it had resolved the issues.
"It's a complicated situation. It's difficult to judge whether Foxconn is shaking up Sharp or they really need some time to check the facts," said Hideki Yasuda, an analyst at Ace Research Institute in Tokyo. Sharp's stock fell 2.3 percent to 129 yen in Tokyo trading. Its shares fell 21 percent last week.Foxconn has made it clear it was surprised by the latest information from Sharp. On Friday, Foxconn said it had received new documents on Feb. 24 -- the day before the Sharp board decision -- that had never been submitted in previous talks. Its financial adviser JPMorgan Chase & Co. and legal adviser Baker & McKenzie are discussing the matter with Sharp to clarify situation and seek solutions, it said.
Sharp has said it did nothing wrong. On Friday, the Osaka-based company said it has properly disclosed contingent liabilities and is discussing them with Foxconn.
The Japanese company has now appointed Toshihiko Fujimoto, formerly chairman of its electronics unit, to the post of "head of strategic alliance," it said in a Monday stock exchange filing. In his new role, Fujimoto will lead the negotiations with Foxconn and oversee their subsequent cooperation, said Toyodo Uemura, a spokesman for Sharp.
Though the contingent liabilities, which are triggered by events such as restructuring or layoffs, could reach 300 billion yen, they could also be much lower than that, the people familiar said. The two companies have a history of fraught negotiations. In 2012, Gou announced plans to invest in Sharp and buy shares at 550 yen a piece. But the deal was never completed as the maker of Aquos TVs posted record losses and its stock tanked. Last week's deal involved buying shares at 118 yen each. Foxconn, the primary assembler of iPhones and iPads for Apple Inc., offered a premium for Sharp in a bid to add its business of making the glass displays for Apple's devices, one of the most valuable components.