Hon Hai proposes deal to buy Sharp

Hon Hai Precision Industry Co (鴻海), the world’s largest contract electronics maker, has proposed to spend ￥300 billion (US$2.5 billion) to acquire financially struggling electronics firm Sharp Corp, according to Japan’s Kyodo news agency.

The report posted on Friday said that the proposed acquisition price is about 50 percent higher than the Japanese company’s current market value, indicating that Hon Hai wants to use the good offer to gain the upper hand and win consensus from the Japanese firm during acquisition negotiations.

According to the report, while Hon Hai — known as Foxconn Technology Group (富士康) outside Taiwan — has proposed acquiring Sharp at a high premium, it also wants Sharp’s current management team, including president and chief executive officer Kozo Takahashi, to step down.

Hon Hai would send a team to Sharp to manage the firm, the report said.

Hon Hai also plans to take over the debt shouldered by Sharp to help the firm address its financial problems, the report said.

However, the report also said that Hon Hai has yet to talk with Sharp’s bank creditors.

The report said that Sharp was shouldering about ￥760 billion in debt as of the end of September.

Hon Hai is not the only potential suitor seeking to buy Sharp, the report said, adding that the Innovation Network Corp of Japan (INCJ), which is sponsored by the Japanese government, is studying a buyout of Sharp.

The report said that the INCJ still needs some time to map out a concrete acquisition deal, and the proposal is unlikely to come out until next year, so Hon Hai is taking advantage of the vacuum created to make a deal.

According to the report, the INCJ is discussing whether it would spin off Sharp’s LCD production operations and then integrate the operations with the INCJ’s small and medium-sized flat-panel unit, Japan Display Inc (JDI).

The INCJ owns a 35 percent stake in JDI.

Although Hon Hai proposed spending ￥300 billion to acquire Sharp, the Kyodo report said that the Taiwanese firm’s previous proposal to raise its stake in Sharp’s flatscreen plant, Sakai Display Products Corp in Osaka’s Sakai City, is still valid.

In July 2012, Hon Hai chairman Terry Gou (郭台銘), in a personal capacity, acquired a 37.6 percent stake in the advanced display panel plant from Sharp, which now holds a 37.6 percent share.