Hon Hai Seeks to Reduce Price It Pays for Sharp, Yomiuri Saysby and
Price of new shares may be cut 10%-20% from agreed level
Hon Hai also renegotiating terms with Sharp's lenders: Nikkei
Hon Hai Precision Industry Co. is seeking to reduce the amount it pays for Sharp Corp. due to concerns about potential liabilities and future earnings, the Yomiuri newspaper reported. The Taiwanese company is also renegotiating terms with Sharp’s lenders, according to the Nikkei.
Hon Hai’s investment in new equity to be issued by Sharp may shrink by 10 percent to 20 percent from the originally agreed 489 billion yen ($4.38 billion) as it cuts the price per share from 118 yen, the Yomiuri said, citing an unidentified person. Sharp’s shares closed at 138 yen in Tokyo on Friday.
Hon Hai is also in talks with Sharp’s main banks, Mizuho Financial Group Inc. and Mitsubishi UFJ Financial Group Inc., to reduce interest rates on 510 billion yen in credit lines and loans due at the end of March, the Nikkei newspaper reported, without saying where it got the information. The Taiwanese company may be asking the lenders to accept less than the 100 billion yen it agreed to pay them for preferred shares in Sharp or to put off the purchases for the time being, the Nikkei said.
Sharp spokesman Yoshifumi Seki declined to comment on both reports when contacted by phone on Sunday. “We have no new update since Feb. 28,” Louis Woo, a spokesman for Foxconn Technology Group, Hon Hai’s parent company, said in an e-mail. Calls to Mizuho and MUFG went unanswered Sunday.
Hon Hai’s 600 billion yen takeover of the struggling Japanese manufacturer has been stalled almost since Sharp’s board agreed to it last month. Within hours, Foxconn said it would postpone finalizing the deal after new information provided by Sharp included about 300 billion yen in possible liabilities for restructurings and layoffs, people familiar with the matter said at the time. Last week, Foxconn again said it would delay the agreement in order to review Sharp’s performance in the current quarter, said people with knowledge of the matter.
Foxconn’s lawyers and bankers have sorted through the contingent liabilities and concluded earlier this month they will likely not require major changes in the board-approved deal, people familiar with the matter have said. The Taiwanese company is taking extra precautions with the period’s financial results because of the last-minute notice about the liabilities, the people said.
Hon Hai reached a basic agreement with Sharp’s banks over a 300 billion yen credit line, the Yomiuri newspaper reported Saturday, potentially clearing a hurdle toward the takeover.
Sharp’s board chose Foxconn’s bid over a competing offer from Innovation Network Corp. of Japan, a government-backed investment fund that planned to pay about 300 billion yen.
Sharp has forecast a 10 billion yen operating profit for the year ending March 31 and didn’t give net income or quarterly outlooks. The company will probably report a net loss of 23.9 billion yen in the final three-month period, according to an average of four analyst estimates compiled by Bloomberg.
The company has been losing money for years and its need for financial support set off the takeover battle between Foxconn and INCJ last year. Its cash totaled 208.5 billion yen at the end of December, according to data compiled by Bloomberg.