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Sharp Declines After Report It Offered Stake for Less

Sharp Corp., the Japanese panel maker selling a stake to FoxconnTechnology Group, fell in Tokyo trading after its credit ratings were cut and a report said the company offered to lower the price of the shares.

Sharp Corp. (6753), the Japanese panel maker selling a stake to Foxconn Technology Group, fell in Tokyo trading after its credit ratings were cut and a report said the company offered to lower the price of the shares.

Sharp dropped 6.1 percent to close at 186 yen, the lowest since Aug. 23, extending its decline this year to 72 percent. Hon Hai Precision Industry Co. (2317), Foxconn’s flagship company, rose 6.1 percent to the highest level in four months in Taipei after reversing loss charges for the planned investment.

The shares that Taipei-based Foxconn agreed in March to buy for 550 yen each may instead be sold at the average price for Sharp shares, the Nikkei newspaper said yesterday, without citing anyone. Foxconn founder Terry Gou ended a visit to Japan last week without announcing a deal, and Standard & Poor’s cut Sharp’s long-term and short-term credit ratings on Aug. 31 to speculative grades, saying the ratings may be lowered further.

“Expectations that a final agreement with Foxconn was close have faded away, and the rating cuts raised concerns again for Sharp’s funding,” Tsunenori Ohmaki, an analyst at Tachibana Securities Co. in Tokyo, said by phone today.

Sharp President Takashi Okuda will visit Taiwan as early as this week to hold talks with Gou, the Sankei newspaper reported today, without citing anyone.

Sharp isn’t the source of the Nikkei’s report, said Miyuki Nakayama, a Tokyo-based spokeswoman for the Osaka-based company. She declined to comment on the Sankei report, saying the company doesn’t comment on executive schedules.

Loss Provisions

Simon Hsing, a spokesman for Hon Hai, declined to comment on the Japanese media reports. Hon Hai closed at NT$90, while Foxconn Technology Co. gained 2.6 percent to NT$117 and Taipei’s benchmark Taiex index rose 0.7 percent.

The Foxconn group, through Hon Hai and Foxconn Technology Co., agreed in March to buy 9.9 percent of Sharp for 67 billion yen ($856 million) in a sale of new shares. Hon Hai’s first-half results included loss provisions of NT$4.5 billion ($151 million) for the planned investment, and as the deal wasn’t approved by local authorities, it reversed the charge as of July 31, the Taipei-based company said Aug. 31. Foxconn Technology reversed provisions of NT$2.26 billion.

Hon Hai is the world’s largest contract manufacturer of electronics, while Foxconn Technology Co. makes computer cases.

Sharp is seeking to raise cash and cut costs as 706 billion yen of its bonds, commercial paper and borrowings mature within one year. The company has said it will cut 5,000 jobs to help reduce fixed costs by 100 billion yen after the Japanese currency rose to a postwar high and slumping global TV demand led to a record loss last fiscal year.

Debts Coming Due

Sharp cut its stake in Pioneer Corp. (6773) to 9.2 percent from 14.28 percent and pledged 15 million Pioneer shares each to Mizuho Corporate Bank Ltd. and Bank of Tokyo-Mitsubishi UFJ Ltd. as collateral, the panel maker said in a filing today to Japan’s Finance Ministry. Sharp has asked its lenders to help refinance debts, Nakayama said.

Sharp said last month it may sell stock holdings if Foxconn invests less money than it said in March. Pioneer rose 2.9 percent to close at 213 yen in Tokyo.

Sharp’s shares have plunged by more than half since Foxconn agreed to purchase the stake. Hon Hai, maker of Apple Inc.’s iPad and iPhone, is Sharp’s largest supplier, according to data compiled by Bloomberg.

S&P lowered Sharp’s long-term rating two levels to BB+, the highest non-investment grade, saying the maker of Aquos televisions suffers from deteriorating market conditions and weak cash flow. The rating company also cut Sharp’s short-term rating to B, the highest non-investment grade.

The electronics maker, whose shares have had the biggest percentage decline on the MSCI Asia Pacific Index this year, was kept on a negative ratings watch.

Sharp is considering cutting bonuses as early as this winter in Japan to save between 20 billion yen and 30 billion yen, Kyodo news service reported yesterday, without saying where it got the information.

To contact the reporters on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net; Janet Ong in Taipei at jong3@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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