Meanwhile, shares of Foxconn, officially known as Hon Hai Precision Industry, were up 2.6 percent in Taiwan.
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Sharp shares, which had gained more than 30% in recent weeks on speculation about the takeover, nosedived 14% after details of the deal were announced. Sharp has been losing money for years now, and a takeover by Foxconn would drastically expand the sales opportunities for Sharp’s LCD panels. If the deal goes through, Sharp would become the first major Japanese electronics maker to be acquired by a foreign company.
Investors in Sharp were also unimpressed by the plan, which will involve the Japanese company issuing more than 3 billion new shares at a significant discount to the stock’s current price on the Tokyo exchange.
Foxconn’s offer was said to be in jeopardy, though, as Japanese government officials were looking to keep Sharp’s technology within the country, and so were favoring the company’s buyer to be a fellow Japanese firm.
But Foxconn said hours later, in a separate statement, that it would not sign until it had clarified terms in a “new key document” from Sharp. Additionally, Foxconn would now also have a better negotiating power and can throw Samsung out of the game when it comes to supplying parts for Apple.
People familiar with the development said Hon Hai is reviewing some 100 items in Sharp’s financial records, which were not previously revealed, according to the Wall Street Journal. Sharp is one of the top manufacturers of display screens, including OLEDs – the area Foxconn is most interested in. 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.
Samsung and state-backed Japanese fund Innovation Network Corp are also said to have lodged bids. “It isn’t a victory for Sharp shareholders”. But policymakers warmed to Foxconn’s offer as a step towards bolstering foreign direct investment in Japan.
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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.
