Sharp Shares Jump in Tokyo After Report INCJ May Buy Stake

  • Rising expectations company will spin off LCD business
  • Government fund would take stake in whole company, Kyodo says

Sharp Corp. surged the most in six weeks following a Kyodo news report that a fund backed by the Japanese government was considering making an investment in the struggling display maker.

The shares climbed 6.5 percent, the biggest gain since Aug. 28, as of the close of trading in Tokyo Tuesday. Innovation Network Corporation of Japan, INCJ, is considering investing about 200 billion yen ($1.7 billion) in Sharp, Kyodo news reported Oct. 11, without saying where it got the information. Sharp may post a 50 billion yen loss at its liquid-crystal display business for the first half of fiscal year 2015, according to the report.

The supplier of displays to Apple Inc. is expected to post a fourth loss in five years in the current fiscal year amid rising debt and slumping demand growth for its screens and televisions. Sharp is considering selling a stake in the LCD operation to INCJ or to Foxconn Technology Group unit Hon Hai Precision Industry Co., people with knowledge of discussions within the companies have said.

“It’s pretty much a given that Sharp will not be able to continue its LCD operations on its own, so the question is who they will partner with,” said Kazunori Ito, an analyst at Barclays in Tokyo. “The fact that INCJ may be interested is not a great surprise and has been reported before. But the reports this time include specific investment figures.”

Yoshifumi Seki, as spokesman for Sharp, declined to comment. INCJ also declined to comment.

Foxconn has signed a letter of intent to buy a stake in Sharp’s liquid-crystal display business in a deal that would give the Taiwan-based company management control as the Japanese electronics maker spins off the unit, people familiar with the plan said in September.

Sharp President Kozo Takahashi is struggling under rising debt and has announced plans to sell the company’s headquarters, withdraw from the TV business in North America and cut back in solar panel manufacturing.

“With every avenue to turn around the ailing tech company looking to have reached a dead end, news of a potential breakthrough thanks to investment by a government-backed fund is positive,” Takeo Miyamoto, an analyst at Mitsubishi UFJ Morgan Stanley, said in a note to clients.

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