Sharp Starts Two-Day Board Meeting on Foxconn’s $5.9 Billion Offer

Embattled Sharp said on Thursday it has accepted a multi-billion-dollar bailout from the parent company of Taiwan’s Foxconn, marking the first foreign takeover of a major Japanese electronics firm.

After Sharp said this month it would devote more resources to studying a deal with Foxconn, the Taiwanese firm’s CEO Terry Gou flew into Osaka to talk with Sharp executives and later announced that the two firms had agreed on most points of a deal. According to the Wall Street Journal, Foxconn had been running as an underdog to the Japanese government backed Innovation Network Corp. of Japan.

A Sharp spokesman declined to comment on the report.

The INCJ had planned to invest 300 billion yen in Sharp and set a 200 billion yen credit line while asking Sharp’s lenders for additional financial support, including wiping out preferred shares.

“Sharp has the technology to build out the components to compete with Samsung as an Apple supplier, which means that with Sharp under its umbrella Foxconn can help Apple wean itself off Samsung”, said Gavin Parry, managing director of Parry International Trading, a brokerage in Hong Kong.

“Sharp is strong in research and development while Hon Hai knows how to market products to customers such as Apple and it also has expertise in production…”

Kyodo put the value of the deal at 660 billion yen ($5.9 billion). The fund had planned to merge Sharp’s screen business with Japan Display, in which the fund owns a majority stake. President Kozo Takahashi said in early February that Sharp was focusing more on Hon Hai’s proposal, although he did not rule out the INCJ offer.

Teruo Asamoto, professor at Kyushu Sangyo University, said Foxconn’s ample resources would also enable much-needed investment in next-generation display technology, including for organic light-emitting diode (OLED) screens which Apple is believed to be adopting in its iPhone around 2018.