Foxconn 2354, +0.31% didn’t elaborate in its statement, but people familiar with the matter said that the Taiwanese iPhone assembler is putting the Sharp 6753, -14.37% deal on hold after reviewing the Japanese firm’s future financial risk.
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One of the sources, reading from details sent by Sharp to Foxconn, said the Japanese group had contingent liabilities that amount to “hundreds of billions of yen”.
But the company has teetered on the edge of bankruptcy for years, piling up eye-watering losses and struggling through a restructuring plan that has yet to pull it out of the red. South Korea’s Samsung Display and LG Display are also investing heavily in the new technology.
Government officials initially backed INCJ’s plan, fearing a loss of Japan’s technological expertise to a foreign company.
However, Foxconn, the parent of Hon Hai Precision Industry Co., outbid government-funded Innovative Network Corp. of Japan (INCJ) to win the deal at $1.05 per share.
For now however, an agreement between these two companies is up in the air, with Foxconn saying it had to examine some new material information that Sharp had provided late Wednesday.
Gavin Parry, managing director of Parry International Trading explained how Sharp had the technology to compete for being an Apple supplier which would be something that Foxconn was immensely interested in.
Known for building electronics components for everyone from Apple to Samsung, Foxconn is a giant of a company.
Sharp chose Foxconn as its preferred partner in a two-day board meeting ending Thursday. Foxconn Chairman Terry Gou, managed to secure a small stake in the company with private investment worth $617 million, by way of which, he bought 979,200 shares.
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Foxconn was expected to finalise a takeover deal for Sharp by the end of February, after the two sides reached consensus on “most points” earlier this month. But it has struggled in recent years as massive investments in advanced LCD plants backfired amid price competition with Asian rivals. The fund has said it wants to merge Sharp’s display business with Japan Display Inc (6740.T), in which it is the top shareholder. The company announced the deal (PDF warning) earlier today, but it would appear that Foxconn has developed a case of cold feet in the hours since.
