Hon Hai Precision Industry Co (鴻海精密) chairman Terry Gou (郭台銘) and Sharp Corp president Kozo Takahashi yesterday formally signed a merger deal in Osaka, Japan, ending a takeover drama that spanned four years of often difficult negotiations.
Flanked by the flags of Taiwan and Japan, the two men shook hands in front of more than 300 reporters gathered at the Osaka-based company’s Sakai plant. Hon Hai, known as Foxconn Technology Group (富士康) outside Taiwan, is to pay ￥388.8 billion (US$3.5 billion) for a 66 percent stake in Sharp.
This marks the first time a Taiwanese company has acquired a large Japanese manufacturer. It is also the first foreign takeover of a major Japanese electronics company.
Photo: Reuters / Kyodo
“I have deep respect for Sharp’s 105-year history, its technological innovation and leadership,” Gou said at the briefing.
Gou said his company, best known for making Apple’s iPhones, would be a catalyst for change at Sharp, which is a leading maker of flat-screen televisions and consumer appliances.
The deal’s consummation caps weeks of drama, when the acquisition repeatedly looked like it could fall apart. Gou had appeared on the verge of grasping his prize a month ago, when Sharp’s board chose Hon Hai over a rival bid from the state-backed Innovation Network Corp of Japan.
However, after learning about liabilities at Sharp, Gou pushed back the final agreement to negotiate a lower price. The Taiwanese company paid a ￥100 billion deposit on Thursday.
Sharp on Friday announced that it would cut borrowing costs for the current fiscal year by ￥7.2 billion, after reaching new debt deals with its main banks.
Mizuho Financial Group Inc and Mitsubishi UFJ Financial Group Inc agreed to amend the terms of existing loans, Sharp said in a statement.
The cash infusion could not have come soon enough. Sharp on Wednesday said it expects an operating loss of ￥170 billion for the fiscal year that ended on Thursday, reversing an earlier forecast of a profit. The company is also to report a net loss for the just-ended fiscal year, bringing total losses over the past five years to more than US$10 billion.
“We faced an increasingly difficult business environment as the display market conditions worsened, leading us to consider drastic reforms,” Takahashi said at the briefing. “This agreement will not only contribute to expansion of our business, but it will also improve our financial standing, creating vast synergies for both companies.”
Sharp said its display business would be the biggest beneficiary of the Hon Hai infusion. About ￥200 billion is to be used to launch production of next-generation screens using organic light-emitting diodes.
Another ￥60 billion is to be spent to improve yield and increase production volumes of the existing LCD operations.
Combining Hon Hai’s manufacturing prowess as the world’s largest assembler with Sharp’s electronics know-how could allow the companies to take the lead in the emerging market for Internet of Things devices, Gou said.
He also praised the quality of Sharp’s existing products.
“A friend of mine bought a Sharp fridge in 1986,” Gou said. “Thirty years later, it is still running at his Beijing home.”
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