Hon Hai Precision Industry Co (鴻海精密) is planning to sell a 1 percent stake in Japan-based Sharp Corp to meet Japanese securities listing rules and help Sharp’s equity listing return to the first section of the Tokyo Stock Exchange (TSE), the Nihon Keizai Shimbun reported yesterday.
Sharp shares were downgraded to from the first to the second section of the TSE in August last year after it reported that its debts had surpassed its assets as of the end of the preceeding March.
TSE regulations state that a company that wants to list its shares on the first section, where major large firms are traded, should have no less than 35 percent of its shares on the market.
Hon Hai, the world’s largest contract electronics maker, now holds a 66 percent stake in Sharp.
The newspaper report echoes the ambitions of Sharp president Tai Cheng-wu (戴正吳), the former deputy of Hon Hai chairman Terry Gou (郭台銘), to return Sharp’s shares to the first section of the TSE.
Sharp last month reported a profit of ￥4.2 billion (US$38.84) for the October to December quarter last year, compared with a ￥24.7 billion loss recorded for the same period in 2015.
It was the first quarterly profit in two years.
Sharp attributed the improvement in its bottom line to swift decisionmaking by Hon Hai that focused on cost reductions.
Sharp last month raised its operating profit forecast twice.
Other Japanese media reports said that Tai had told other Sharp executives that he was hoping the company’s shares would return to TSE’s first section by the end of this year or next spring and that the company had begun preparatory work for the upgrade.
The Nihon Keizai Shimbun report said that before completing the US$3.5 billion acquisition of Sharp in August last year, Hon Hai promised not to unload any Sharp shares without the Japanese firm’s consent within two years of the purchase.
However, for Sharp to regain a place in the TSE’s first section, Hon Hai has no choice but to cut its stake, so it is expected to begin talks with Sharp about the issue, the paper said.
Century-old Sharp was forced to seek outside investment after incurring heavy losses in its LCD operations.
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