- Deal would hand the Apple iPhone assembler a surprise victory
- INCJ had been expected to beat out Foxconn for the company
Sharp Corp. surged after Japanese broadcaster NHK reported it planned to give preference to a rescue plan from Taiwan’s Foxconn Technology Group over a government-backed fund. The struggling display maker said it’s still in negotiations over a bailout and will make a final decision within a month.
Foxconn and government-backed Innovation Network Corp. of Japan are vying for Sharp, which teetered on the brink of bankruptcy in 2012 after its Aquos TVs lost market share to those from Samsung Electronics Co., LG Electronics Inc. and lower-cost Chinese rivals. Their battle is regarded as a litmus test of Japan’s willingness to open its economy.
Sharp has opted to give Foxconn preferred negotiating rights after the Taiwanese company increased the value of its offer to more than 700 billion yen ($5.9 billion), NHK said without citing anyone. In response, Sharp said it had been in talks with multiple companies but narrowed the field of candidates it’s talking to to just INCJ and Foxconn. Sharp plans to sign a final contract in one month, it added in a statement.
A deal with Foxconn would signal a surprise victory over INCJ. The government fund had offered about 300 billion yen and would have kept the iconic company in Japanese hands, people familiar with the matter have said. Foxconn, which assembles Apple Inc.’s iPhones, didn’t respond to an e-mailed request for comment.
“This would be fantastic news for Sharp shareholders, if not for everybody else involved,” said Atul Goyal, an analyst at Jefferies Group LLC. “A joint deal with INCJ, where Foxconn takes the LCD business, makes a lot more sense. I don’t see why Foxconn would want the rest of Sharp’s operations.”
The stock climbed 14 percent as of 1:59 p.m. in Tokyo. It earlier jumped as much as 26 percent, heading for its biggest gain on record according to data compiled by Bloomberg.
Chairman Terry Gou is seeking to broaden Foxconn’s remit, transforming the world’s largest electronics contract manufacturer and parent of Hon Hai Precision Industry Co. into a company that also makes key electronics components and devices.
If the deal goes through, Foxconn will assume control not only of a supply of screens for phones and tablets, but also Sharp’s sprawling product lines that range from white goods to solar panels.
The reported agreement with Foxconn follows years of on-off talks with the Taiwanese company, which had offered 550 yen a share for Sharp in 2012 before Sharp’s subsequent forecast for a record loss caused its stock to plunge. Gou had taken his case for an acquisition of Sharp directly to major lenders and the Japanese government in an attempt to head off INCJ, according to a person familiar with the talks.