Why Foxconn’s multi-billion-dollar deal for Sharp is dead in the water

“Board members of struggling Japanese electronics maker Sharp Corp. met Thursday and agreed to sell the company to Taiwan’sFoxconn Technology Group for almost $6 billion, a decision hailed as a symbol of a push by Japan’s government to open up the country’s notoriously insular industries,” Dow Jones Newswires reports. “There was one snag. Foxconn, which assembles most of Apple Inc.’s iPhones—was having second thoughts. In a written statement released hours later, Foxconn said it would delay signing any deal because it had been surprised by new information Sharp had disclosed just a day before, and needed more time to study the details.”

“The surprise was a list of about 100 items of contingent liabilities—or potential future financial risks at Sharp totaling roughly ¥ 350 billion, or $3.1 billion—that Foxconn would assume if it completed the takeover, people familiar with the matter said,” Dow Jones Newswires reports. “While Foxconn said it hoped to resolve the matter quickly and complete the deal, the 11th-hour development was symbolic of topsy-turvy negotiations in which the foreign suitor outmaneuvered a Japanese government-backed fund to win over one of the country’s most venerated brands.”

“If Foxconn can join forces with Sharp, it would be in a better position to develop advanced screens for Apple’s iPhones, which Foxconn already assembles. An iPhone’s most expensive component is its touch-screen display, making up more than 20% of manufacturing costs, which is why Mr. Gou is eager to supply them, analysts say,” Dow Jones Newswires reports. “Still, Foxconn faces skepticism about how it would reverse Sharp’s heavy losses if it takes over, given Mr. Gou’s pledge not to split up the company or make major layoffs.”

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MacDailyNews Take: The saga continues.

Foxconn’s $5.1 billion bid for Sharp could be good for Apple, too – February 25, 2016
Apple supplier Sharp accepts Hon Hai’s $6.2 billion takeover offer; Hon Hai says deal on hold – February 25, 2016
Foxconn fast-tracks $5.5 billion Sharp takeover bid – February 4, 2016
State-backed Japanese fund in race with Foxconn to save Sharp – January 21, 2016
Hon Hai considering $1.7 billion stake in Sharp LCD business; to ask Apple to invest a ‘few hundred million’ – September 28, 2015
Hon Hai offers to buy Sharp’s LCD business, wants Apple funds – September 21, 2015
Apple suppliers Sharp, Foxconn in talks for LCD joint venture – August 24, 2015
Beleaguered Sharp’s problems present an opportunity for mighty Apple – May 15, 2015
Apple display supplier Sharp warns on ability to stay afloat after $1.9 billion loss – May 14, 2015
Apple iPhone display supplier Sharp boosts operating profit – August 1, 2014
Sharp dedicates entire LCD plant to Apple – June 30, 2014
Hon Hai in no hurry to finalize Sharp deal – June 26, 2013
Sharp to replace chairman, president after losses – May 14, 2013

1 Comment

  1. Having worked in Japan a long time this is not a surprise to me. No knock on Sharp itself, it just seemed like there was a lot of hidden bad paper behind a lot of companies. It was a standing joke among me and my friends that if you tried to take over a Japanese company some banker would reach into his files and pull out some old notes and smile to think that they might finally get paid back.

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