Sharp agrees to Foxconn takeover

In a board meeting held Thursday, Sharp accepted the bailout plan in which the Taiwanese firm will spend 700 billion Japanese yen (US$6.25 billion) to acquire and restructure the struggling Japanese company. Sharp said it would issue around $4.4 billion worth of new shares to Foxconn, known formally as Hon Hai Precision Industry Co.

Foxconn’s investment is set to total more than 650 billion yen ($5.8 billion), a source familiar with the matter said, declining to be identified as he was not authorised to speak on the matter.

If the two companies can agree on a deal, it would solidify Foxconn’s position as the primary contract manufacturer for Apple and allow Sharp to focus on the mass-production of OLED screens by 2018.

Sharp said it had received a commitment from Foxconn and related companies that its brand would be retained as well as its existing employees.

In a Wall Street Journal report, Foxconn said that it is delaying the signing of a definitive Sharp takeover agreement after learning more about just how financially unstable the company is via details Sharp disclosed a day earlier. Japan’s minister of economy, trade and industry told reporters Thursday he hoped Sharp would develop under Foxconn and believed that jobs and the regional economy would be protected. Foxconn also assembles products for Amazon.com and Xiaomi Corp., in addition to Apple, who would all be able to access Sharp’s components through Foxconn.

After reports of the deal emerged, Sharp’s shares in Japan tumbled 14.3 percent Thursday.

Sharp had faced a choice between Hon Hai’s takeover bid and support from the Innovation Network Corp. of Japan, a state-backed fund. The fund offered Sharp a 300 billion yen injection as well as a 200 billion yen credit line.

For now however, an agreement between these two companies is up in the air, with Foxconn saying it had to examine some new material information that Sharp had provided late Wednesday.

Japanese electronics maker Sharp is one of the three suppliers of iPhone screens.

The Taiwanese company agreed at the time to buy a 10 percent stake in Sharp, but the deal did not materialize amid a decline in Sharp’s share price.