Foxconn Technology Group said it will re-evaluate the expected return on its planned purchase of a stake in Sharp Corp. and resubmit an application to Taiwan regulators by the end of the month.
Taiwan’s Investment Commission sent the original application back to Foxconn, asking for more information on the group’s forecast for profit from the deal. The regulator and Foxconn were unable to provide details on the expected return.
“We will reflect on the regulator’s concerns, re-evaluate and then resubmit after we’ve made a joint announcement with Sharp about the transaction,” Simon Hsing, spokesman for Foxconn’s Taipei-based flagship Hon Hai Precision Industry Co., said by phone today.
Foxconn said in March it agreed to buy 9.9 percent of the Osaka-based company for 67 billion yen ($854 million). The value of that proposed stake has fallen more than 65 percent as Sharp’s shares declined, prompting the Taiwanese company to write off more than NT$6.4 billion ($214 million) for the second quarter before saying Aug. 3 it will renegotiate the price.
Foxconn plans to invest in Sharp through its two Taipei-listed units, Hon Hai Precision Industry Co., the world’s largest contract manufacturer of electronics, and Foxconn Technology Co., a maker of computer cases.
“We asked them to provide more information on the expected returns on the investment and other financial information,” said Emile Chang, deputy executive secretary of the Investment Commission at Taiwan’s Ministry of Economic Affairs. “This is not a rejection of their application, they can provide more information and resubmit.”
Sharp on Aug. 2 widened its full-year loss forecast eight-fold to 250 billion yen, prompting its shares to drop 28 percent the following day to close at 192 yen, 65 percent below the 550 yen-per-share Foxconn agreed to pay for the stake.
Hon Hai dropped 3.8 percent and Foxconn Technology Co. fell its daily 7 percent limit the same day in Taipei before rebounding in the next session after saying it will renegotiate the price and the writedown will no longer apply.
Hon Hai gained 4.4 percent today, while Sharp advanced 1.6 percent.