Sharp Corp is selling ￥10.4 billion (US$111 million) of shares to a unit of Samsung Electronics Co as the unprofitable Japanese electronics maker tries to rebound from a record annual loss.
Sharp is selling 35.8 million shares to the South Korean company for ￥290 each, according to a filing with Japan’s Ministry of Finance yesterday. That is 15 percent lower than the closing price of ￥341 in Tokyo.
Samsung, the world’s largest maker of smartphones and TVs, said the investment will secure a supply of LCD panels from Sharp. It will not be involved in Sharp’s management.
“￥10 billion is too small to meet Sharp’s needs but it does send a positive signal to the market,” said Hideki Yasuda, an analyst at Ace Securities Co in Tokyo. “This means the giant electronics maker feels confident in Sharp.”
Shares in Sharp soared 17.06 percent yesterday on reports that it was ready for a tie-up with Samsung worth more than US$100 million. The shares ended 14.05 percent higher in Tokyo trading.
Sharp’s discussions with Samsung follow a stake sale to Qualcomm Inc and attempts to revive profitability by cutting jobs and selling assets including assembly plants.
Sharp, which has failed to conclude a deal with Taiwan’s Hon Hai Precision Industry Co (鴻海) after almost a year of talks, is trying to raise funds as it forecasts a full-year loss of ￥450 billion.
The share sale will close on March 28, according to the filing. Sharp will use ￥6.9 billion of the proceeds to purchase new LCD technologies and ￥3.23 billion for capital expenditures related to mobile devices.
The maker of Aquos TVs lost 55 percent of its market value last year and warned in November about its ability to survive after hemorrhaging ￥103 billion in cash from operations in the fiscal first half.
In December last year, Sharp turned to Qualcomm, the biggest maker of mobile phone chips, for as much as ￥9.9 billion in new capital after failing to secure a deal with Hon Hai because the companies could not agree on a price for the stock, two people familiar with the matter said last month.
The decision to accept a capital injection from a foreign firm — a rare move for a Japanese company — would mark a major comedown for both the company and Japan’s manufacturers, said Hiroshi Sakai, chief economist with SMBC Friend Research Centre.
“For Japan, it is symbolic and shocking news as Sharp, which used to be a frontrunner in the panel industry, is struggling while its rival Samsung has raced past it,” he said.
He added that the deal would not solve all of Sharp’s woes, as the struggling firm cuts jobs and overhauls its business after saying last month that its loss in the nine months to December last year had doubled to about US$4.6 billion.
Rival Sony Corp, meanwhile, is selling off its headquarters in Manhattan, New York, and a major building in Tokyo to raise cash, while money-losing Panasonic Corp is undergoing a similar painful restructuring.
Given the sector’s struggles, deals between Japanese and foreign rivals are likely to increase, Sakai said.
“Many other Japanese electronics makers are struggling to survive. However, they still have attractive technologies and some foreign rivals are quite interested in them,” he said.
Investors cheered the reports on expectations it would usher in higher output at Sharp’s flat-panel manufacturing plants, said Toshiyuki Kanayama, senior market analyst at Monex Inc.
“Investors are expecting that Samsung’s significant sales force would contribute to Sharp plants’ operation rates, as demand from Apple [Inc] is declining,” he said.