”5 questions about Foxconn-Sharp takeover deal”

”Taiwan’s Foxconn has delayed the signing of a takeover agreement with Japanese electronics giant Sharp, leaving the US$5.9 billion acquisition up in the air. Will there still be a deal? We ask analysts”.

The surprise move came just hours after board members of the struggling Japanese consumer electronics maker agreed to sell the century-old company to Foxconn, known formally as Hon Hai Precision Industry, for almost US$6 billion. The Taiwanese tech giant, which is the main assembler of Apple’s iPhone, said it needed more time to study “new material information” from Sharp and “any signing of a definitive agreement” will be postponed until both parties “arrived at a satisfactory understanding and resolution of the situation”.

Foxconn’s announcement had an immediate impact on Sharp’s shares, which fell by more than 14 per cent in early trade.

Q: What is behind the 11th hour delay?

Several unconfirmed reports quoting unnamed sources suggest that the “new material information” could be linked to the huge losses on Sharp’s balance sheet.

The Nikkei Asian Review reported that Sharp had on Wednesday (Feb 24) morning sent Foxconn documents listing the details of these losses, including severance pay, breach-of-contract penalties and repayments of government funds. The business journal put the liabilities at 350 billion yen (US$3.1 billion).

On the other hand, Reuters quoted sources who said the liabilities could tally up to “hundreds of billions of yen” without elaborating on the nature of the liabilities or the exact amount.

Foxconn and Sharp have not issued any official statements.

Q: Is there still a deal in the making?

According to analysts that Channel NewsAsia spoke to, a deal is still likely on the table despite the last-minute hiccup.

“Even though it’s odd that after pursuing a company for four years, you only find out about off-balance contingent liabilities so near to a final agreement, I think a deal is still in the works,” said Alberto Moel, senior research analyst at Sanford C. Bernstein.

“No doubt there is a possibility that this could kill the deal, but Hon Hai has said that it is actively sorting out the issue. It is a deal that both parties want so I think they will try to sort it out over the next few days,” the Hong Kong-based analyst added.

According to a Reuters report, Sharp Corp CEO Kozo Takahashi and Foxconn Chief Executive Terry Gou are planning a meeting on Friday (Feb 26) in China, a person familiar with the matter said……..”

Source: Channel News Asia – http://www.channelnewsasia.com/news/business/international/5-questions-about-foxconn/2551116.html

The Board Director Training Institute (BDTI) is a "public interest" nonprofit in Japan dedicated to training about directorship, corporate governance, and related management techniques. It is certified by the Japanese government to conduct these activities as a regulated nonprofit. Read a summary about BDTI here, and see a menu of its services for both corporations and investors here.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.