Fox­conn de­lays sharp deal

The Pak Banker - - COMPANIES/BOSS -

Fox­conn Tech­nol­ogy Group is de­lay­ing fi­nal­iza­tion of its deal for Sharp Corp. to get a clear un­der­stand­ing of the Ja­panese com­pany's per­for­mance in the cur­rent quar­ter, in­creas­ing the chances an agree­ment won't be reached this month, ac­cord­ing to peo­ple fa­mil­iar with the mat­ter.

Fox­conn, which agreed to pay more than 600 bil­lion ($5.3 bil­lion) for con­trol of Sharp, has asked the Osaka-based com­pany and its au­di­tor for the lat­est fi­nan­cial re­sults, said the peo­ple, who wouldn't be iden­ti­fied be­cause the mat­ter is pri­vate. Sharp had fore­cast an op­er­at­ing profit of 10 bil­lion yen for the fis­cal year that ends this month, though an­a­lysts es­ti­mated the com­pany will have an op­er­at­ing loss of about 24 bil­lion yen.

Sharp's board last month voted to ac­cept Fox­conn's of­fer over a com­pet­ing bid from In­no­va­tion Net­work Corp. of Ja­pan, a govern­ment-backed in­vest­ment fund that planned to pay about 300 bil­lion yen. Just hours af­ter the board de­ci­sion, Fox­conn said it would post­pone fi­nal­iz­ing the agree­ment un­til it could work through ma­te­rial new in­for­ma­tion it had re­ceived from Sharp. That in­for­ma­tion in­cluded about 300 bil­lion yen in po­ten­tial li­a­bil­i­ties for re­struc­tur­ings and lay­offs, peo­ple fa­mil­iar with the mat­ter said.

"A fourth-quar­ter loss for Sharp is a given, there aren't likely to be deal

break­ing sur­prises there," said Atul Goyal, an an­a­lyst at Jef­feries Group LLC. "This looks like an­other ne­go­ti­at­ing ploy by Fox­conn."

Fox­conn is ne­go­ti­at­ing with Sharp's banks to mit­i­gate the costs of those li­a­bil­i­ties. Un­der cer­tain cir­cum­stances, Fox­conn may seek to re­duce the 100 bil­lion yen it had planned to pay Mizuho Fi­nan­cial Group and Mit­subishi UFJ Fi­nan­cial Group for pre­ferred stock they hold in Sharp, ac­cord­ing to a dif­fer­ent per­son fa­mil­iar with the mat­ter.

Fox­conn's lawyers and bankers have sorted through the con­tin­gent li­a­bil­i­ties and con­cluded ear­lier this month they will likely not re­quire ma­jor changes in the board-ap­proved deal, peo­ple fa­mil­iar with the mat­ter have said. The Tai­wanese com­pany is tak­ing ex­tra pre­cau­tions with the pe­riod's fi­nan­cial re­sults be­cause of the last-minute no­tice about the li­a­bil­i­ties, the peo­ple said. "Sharp and Fox­conn have not set a sign­ing date. Both com­pa­nies are work­ing hard to reach a sat­is­fac­tory agree­ment as soon as prac­ti­cally pos­si­ble," said Toy­odo Ue­mura, a spokesman for Sharp. Fox­conn didn't im­me­di­ately re­spond to in­quiries sent to its me­dia depart­ment. Sharp has fore­cast a 10 bil­lion yen op­er­at­ing profit for the year end­ing March 31 and didn't give net in­come or quar­terly out­looks.

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