Fox­conn, Sharp said to weigh re­vis­ing terms of ap­proved deal

The Pak Banker - - COMPANIES/BOSS -

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.

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