Hon Hai to take control of Sharp’s LCD business

PRELIMINARY::People familiar with the arrangement said the Taiwanese tech giant had signed a letter of intent to buy a non-majority equity stake in the unit

Bloomberg

Sat, Sep 26, 2015 - Page 14

Hon Hai Precision Industry Co (鴻海精密) has signed a letter of intent to buy a stake in Sharp Corp’s LCD business in a deal that would give the Taiwanese firm management control as the Japanese electronics maker spins off the unit, according to people familiar with the plan.

The companies still need to complete price negotiations and due diligence, and there is no guarantee a final deal will be reached, said the people, who asked not to be identified because the plan has not been announced.

Taipei-based Hon Hai, also known as Foxconn Technology Group (富士康科技集團), would get management control under the preliminary terms, although it will not necessarily hold a majority of equity in the unit, which makes display panels for mobile phones and tablets, they said.

Sharp, a supplier to Apple Inc and Xiaomi Corp (小米), is under financial pressure to reach a resolution for the LCD business after years of negotiations without result.

Sharp yesterday said it would miss its first-half profit forecast, confirming a Bloomberg News report on Thursday and sending shares down as much as 10 percent.

Sharp pared those declines in Tokyo trading after the Hon Hai report and closed down 5.8 percent at ¥146. The shares fell earlier in the day to a record low ¥139. Hon Hai shares gained 0.8 percent to close at NT$84.3 in Taipei.

“We are considering a variety of options for reforming the LCD business and have not entered detailed negotiations with a specific company,” Sharp spokesman Yoshifumi Seki said.

Hon Hai spokesman Chu Wen-min (朱文敏) declined to comment.

Hon Hai wants to model this deal on Hon Hai chairman Terry Gou’s (郭台銘) personal investment in Sharp’s Sakai Display operations in 2012, which resulted in the Taiwanese company having management control over the LCD factory, one of the people said.

Hon Hai is the world’s biggest maker of iPhones. The company also makes iPads, Microsoft Corp’s Xbox console and PCs for Hewlett-Packard Co and Dell Inc. Hon Hai gets about half its revenue from Apple and is seeking to expand beyond assembly to offer components, including displays and semiconductors.

Sharp first agreed to sell a stake to Hon Hai in 2012, yet talks foundered over disagreements on price and the Taipei-based company’s role in management.

Gou later said he had been “fooled” in his discussions with Sharp, and the two sides decreased exchanges.

Gou bought a minority stake in Sakai Display, which makes larger panels used in TVs.