Wed, Mar 27, 2013 - Page 1 News List

Hon Hai injection of capital off the table: Sharp Corp

DEAL DEADLINE PASSES:Sharp is struggling to repair a tattered balance sheet and has sought out other potential investors, including Qualcomm Inc

AFP, TOKYO

Sharp Corp said yesterday that a capital injection from Taiwan’s Hon Hai Precision Industry Co (鴻海精密) was off the table, as the deadline passed for a deal seen as crucial for the troubled Japanese electronics giant.

Last year, Sharp announced an investment agreement then valued at about US$800 million with Hon Hai, which makes Apple products in China, but the deal stalled as the Japanese firm’s share price nosedived.

Months of speculation over the fate of the deal followed as cash-strapped Sharp sought out other investors, including US-based chipmaker Qualcomm Inc and South Korean rival Samsung Electronics Co.

Sharp confirmed the agreement — which would have given Hon Hai nearly 10 percent of the firm — was dead as yesterday’s deadline passed.

Sharp said the pact faltered because it could not win approval from the “relevant authorities,” without elaborating.

The firm, which is struggling to repair a tattered balance sheet, said it was “examining the possibility of other ways of funding due to the unfulfillment of this payment.”

Like rivals Sony Corp and Panasonic Corp, the maker of Aquos-brand electronics has been hammered by credit rating downgrades and record losses, which saw the century-old firm warn about its own survival last year.

Sharp has embarked on a painful restructuring, including thousands of job cuts and slashed wages from the factory floor to the boardroom.

It also said it would put up real-estate as collateral for desperately needed bank loans, including its Osaka headquarters.

Sharp and Hon Hai would continue discussing tie-ups, which may or may not include a share sale to the Taiwanese company under different terms, Sharp spokeswoman Miyuki Nakayama said.

Hon Hai yesterday said the company would continue to negotiate with Sharp to secure a 9.9 percent stake in the Japanese company as agreed during an high-ranking executive meeting on Sunday. After five hours of discussion, the companies agreed that their cooperation would continue, Hon Hai said in a filing to the Taiwan Stock Exchange.

Hon Hai said the investment contract, which Hon Hai and Sharp inked on March 26 last year, is valid for three years, meaning the last deadline would be March 26, 2015, the filing showed.

In addition, Hon Hai said it has discussed with Sharp buying a 9.9 percent share in Sharp at the market price, rather than ¥550 as agreed on March 26 last year. Hon Hai also proposed closing the deal within three months after obtaining the support of Sharp’s creditor banks.

Based on the contract signed last year, Hon Hai hoped to seek the support of banks and has requested them to send representatives to join the management team in an effort to revive the Japanese company, the Hon Hai statement said.

Additional reporting by Lisa Wang

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