Hon Hai Precision Industry Co (鴻海精密) and Japan’s Sharp Corp worked through the weekend to salvage their US$6 billion deal, with revisions to terms the Japanese firm put forth last week, people familiar with the matter said.
Bankers and lawyers are going through a list of Sharp liabilities that could exceed ¥300 billion (US$2.6 billion), a last-minute stumbling block in Hon Hai’s effort to take control of the struggling Japanese company, according to the people, who asked not to be identified, as the talks are not public.
It is not clear if Hon Hai, known as Foxconn Technology Group (富士康科技集團) outside Taiwan, would lower its offer or change its bid in some other way, the people said, adding that any material changes would require Sharp’s board to vote again.
Foxconn founder and chairman Terry Gou (郭台銘) has fought for months to take over Sharp, battling a competing offer from a once-favored domestic bidder, Innovation Network Corp of Japan (INCJ).
Foxconn offered a package worth in excess of ¥600 billion — more than twice INCJ’s bid — with most of the money going into Sharp through the purchase of additional shares.
Only hours after Sharp’s board approved its offer on Thursday, Foxconn said it received new information from Sharp and would not go through with the deal until it resolved the issues.
“It’s a complicated situation. It’s difficult to judge whether Foxconn is shaking up Sharp or they really need some time to check the facts,” said Hideki Yasuda, an analyst at Ace Research Institute in Tokyo.
Sharp’s stock fell 2.3 percent to ¥129 in Tokyo trading yesterday. Its shares fell 21 percent last week.
Foxconn has made it clear it was surprised by the latest information from Sharp. On Friday, Foxconn said it had received new documents on Wednesday last week — the day before the Sharp board decision — that had never been submitted in previous talks.
Its financial adviser, JPMorgan Chase & Co, and legal adviser Baker & McKenzie are discussing the matter with Sharp to clarify the situation and seek solutions, it said.
Sharp has said it did nothing wrong. On Friday, the Osaka-based company said it has properly disclosed contingent liabilities and is discussing them with Foxconn.
The Japanese firm has appointed Toshihiko Fujimoto, formerly chairman of its electronics unit, to the post of “head of strategic alliance,” it said in a stock exchange filing yesterday.
In his new role, Fujimoto will lead the negotiations with Foxconn and oversee their subsequent cooperation, Sharp spokesman Toyodo Uemura said.
Though the contingent liabilities, which are triggered by events such as restructuring or layoffs, could reach ¥300 billion, they could also be much lower, the people familiar with the matter said.
The two companies have a history of fraught negotiations. In 2012, Gou announced plans to invest in Sharp and buy shares at ¥550 a piece, but the deal was never completed as the maker of Aquos TVs posted record losses and its stock tanked. Last week’s deal involved buying shares at ¥118 each.
Foxconn, the primary assembler of iPhones and iPads for Apple Inc, offered a premium for Sharp in a bid to add its business of making the glass displays for Apple’s devices, one of the most valuable components. Gou might be reluctant to take on additional financial costs as he tries to make the high-stakes deal pay off.
Under the plan announced by Sharp, Foxconn would get control over the company by spending ¥484.3 billion to buy additional shares at a discount and give Gou and Foxconn 65.9 percent of the Japanese company.
Foxconn would also pay ¥100 billion for preferred shares held by lenders Mizuho Financial Group and Mitsubishi UFJ Financial Group, and additional cash for other assets.
Existing shareholders would receive nothing directly under the plan and Sharp would remain a publicly traded company. Sharp would keep its brand under new ownership and pledged to maintain employment levels.
Gou and Sharp CEO Kozo Takahashi also met over the weekend as part of the negotiations, one person familiar with the matter said.
Sharp might be under greater pressure to make the deal work. Besides the share price decline, it also faces the expiration of credit lines with its banks at the end of next month.
“Sharp wants to close the deal by the end of March, but Foxconn doesn’t have to hurry up because INCJ has already given up. It’s a favorable situation for Foxconn,” Yasuda said.
POTENTIAL SETBACK: Although Chinese chip designers and foundry firms already have US EDA software, they might be unable to update those programs under new US rules The US’ latest ban on advanced electronic design automation (EDA) software exports to China might hinder Chinese chip companies from accessing advanced semiconductor technology, as they attempt to upgrade to 3-nanometer processes in the next three to five years, market researcher TrendForce Corp (集邦科技) said yesterday. The US Department of Commerce’s Bureau of Industry and Security on Friday announced bans on EDA tools for gate-all-around field-effect transistors (GAAFET), a new-generation semiconductor technology that US chipmaker Intel Corp and Samsung Electronics Co from South Korea are adopting to make 4-nanometer and 3-nanometer chips. The bureau in a statement said that gate-all-around field-effect transistor
WIDENING THE FIELD: Human resources managers must drop prejudices regarding gender, appearance and age to find the best candidates, Micro Technology said The job market for Taiwan’s semiconductor industry remained tight this quarter, as hiring activity slowed from a record high last quarter, a survey released yesterday by online human resource firm 104 Job Bank (104人力銀行) showed. Ongoing labor shortages have prompted local semiconductor firms to recruit more women and foreigners in Taiwan and in Southeast Asia, the job bank said. The talent gap in the first quarter reached 35,000 people per month, a surge of 39.8 percent from the same period last year, as the contactless economy and digital transformation shore up demand for semiconductors, 104 Job Bank said in its annual report
POSITIVE CULTURE: Pursuing 12-inch wafers earlier than peers helped TSMC lead the industry, said a former executive, whose main regret was working for SMIC in China Corporate culture at Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) is what made the chipmaker a leading player in the global industry, a former executive said in an interview with California’s Computer History Museum. “One of the really important reasons that TSMC succeeded” is the culture at the firm, where “if equipment went down at two o’clock in the morning, we just called an equipment engineer,” and the worker would not complain, said former TSMC joint chief operating officer Chiang Shan-yi (蔣尚義). “We didn’t really do anything special, anything great, but we didn’t make any major mistakes,” when compared with competitors, such
Cloud computing equipment company Wiwynn Corp (緯穎科技), which counts Meta Platforms Inc as one of its key customers, is boosting capacity expansion in Malaysia through a new investment of about NT$1.94 billion (US$64.7 million), it said yesterday in a statement filed with the Taiwan Stock Exchange. The investment, which aims to help the company with business development and strategic arrangements, would be made through subsidiary Wiwynn Technology Services Malaysia Sdn Bhd to build a new factory, Wiwynn said in the filing. The announcement came about one-and-a-half months after the company started phase II of its new server printed circuit board assembly (PCBA)