INCJ Fund Says Sharp Needs Just $2.5 Billion to Revive Growth

Updated on
  • Fund CEO says no agreement has been reached on a rescue
  • Taiwan's Foxconn is said to be weighing a 600 billion yen bid

A cash infusion of 300 billion yen ($2.5 billion) is enough to plug losses and revive growth at Sharp Corp., according to the head of the government-backed fund considering a rescue of the struggling electronics maker.

Toshiyuki Shiga, chief executive officer of Innovation Network Corp. of Japan, said the fund is conducting due diligence but hasn’t reached a final agreement on bailing out the company laden with almost 800 billion yen of total debt. INCJ is considering an investment of about 300 billion yen, splitting the funds between Sharp’s liquid-crystal-display panel business and remaining operations, a person familiar with the discussions said last week.

“Our goal is a return to growth. After separating the LCD business, we’ll stop the hemorrhaging and implement a growth strategy for the rest of the company,” Shiga told reporters after an unrelated government-panel meeting in Tokyo. “When it comes to financing growth, no need for more than 300 billion yen. Otherwise it doesn’t make economic sense.”

Sharp is learning toward a deal with INCJ over a potential offer from Taiwan’s Foxconn Technology Group, which is said to be valued at about 600 billion yen. A government rescue would allow it to keep its technology within Japan and work more closely with domestic companies, people familiar with the talks have said.

Japanese Bailouts

INCJ’s investment would be the most recent example of Japan’s government providing support to struggling domestic companies to keep technology out of the hands of foreign rivals. Four years ago, INCJ created Japan Display Inc. from the troubled screen units of Toshiba Corp., Sony Corp. and Hitachi Ltd. with a 200 billion yen infusion.

Sharp fell 2.3 percent to finish at 129 yen in Tokyo on Monday. The stock gained 5.6 percent last week after news emerged of Foxconn’s bid and INCJ’s possible involvement in a bailout.

The possibility of a government bailout first surfaced in 2012, when Sharp teetered on the brink of bankruptcy after its Aquos TVs lost market share to those from Samsung Electronics Co., LG Electronics Inc. and Chinese rivals.

The Osaka-based company is set to post a combined 1.22 trillion yen of net losses over five years to March 31.

(Updates with Sharp's share price in the final paragraph.)
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