Foxconn sizes up Sharp’s liabilities
by Takashi Amano,
2016-03-16 05:53:07.0
TOKYO — Foxconn Technology Group is delaying finalisation of its deal for Sharp to get a clear understanding of the Japanese company’s performance in the current quarter, increasing the chances an agreement will not be reached this month, according to people familiar with the matter.
Foxconn, which agreed to pay more than ¥600bn for control of Sharp, has asked the Osaka-based company and its auditor for the latest financial results, said the people, who would not be identified because the matter is private.
Sharp had forecast an operating profit of ¥10bn for the financial year that ends this month, although analysts estimated the company will have an operating loss of about ¥24bn.
Sharp’s board last month voted to accept Foxconn’s offer over a competing bid from Innovation Network of Japan, a government-backed investment fund that planned to pay about ¥300bn.
Just hours after the board decision, Foxconn said it would postpone finalising the agreement until it could work through material new information it had received from Sharp. That information included about ¥300bn in potential liabilities for restructurings and layoffs, people who are familiar with the matter said.
Foxconn is negotiating with Sharp’s banks to mitigate the costs of those liabilities.
Foxconn may seek to reduce the ¥100bn it had planned to pay Mizuho Financial Group and Mitsubishi UFJ Financial Group for preferred stock they hold in Sharp, according to a different person who is familiar with the matter.
Foxconn’s lawyers and bankers have sorted through the contingent liabilities and concluded earlier this month they will be unlikely to 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.
"Sharp and Foxconn have not set a signing date. Both companies are working hard to reach a satisfactory agreement as soon as practically possible," said Toyodo Uemura, a spokesman for Sharp.
Foxconn did not immediately respond to inquiries sent to its media department.
Sharp has been losing money for years and its need for financial support set off the takeover battle between Foxconn and INCJ last year. The company had ¥208.5bn in cash at the end of December.
Sharp faces the expiration of ¥510bn in credit lines and loans on March 31.
Bloomberg
OUTFOXED: A Foxconn factory in Wuhan, China. Foxconn, the primary assembler of iPhones and iPads for Apple, says its bid for Sharp was delayed, when new information came to light on Friday. Picture: REUTERS/YUYA SHINO
TOKYO — Foxconn Technology Group is delaying finalisation of its deal for Sharp to get a clear understanding of the Japanese company’s performance in the current quarter, increasing the chances an agreement will not be reached this month, according to people familiar with the matter.
Foxconn, which agreed to pay more than ¥600bn for control of Sharp, has asked the Osaka-based company and its auditor for the latest financial results, said the people, who would not be identified because the matter is private.
Sharp had forecast an operating profit of ¥10bn for the financial year that ends this month, although analysts estimated the company will have an operating loss of about ¥24bn.
Sharp’s board last month voted to accept Foxconn’s offer over a competing bid from Innovation Network of Japan, a government-backed investment fund that planned to pay about ¥300bn.
Just hours after the board decision, Foxconn said it would postpone finalising the agreement until it could work through material new information it had received from Sharp. That information included about ¥300bn in potential liabilities for restructurings and layoffs, people who are familiar with the matter said.
Foxconn is negotiating with Sharp’s banks to mitigate the costs of those liabilities.
Foxconn may seek to reduce the ¥100bn it had planned to pay Mizuho Financial Group and Mitsubishi UFJ Financial Group for preferred stock they hold in Sharp, according to a different person who is familiar with the matter.
Foxconn’s lawyers and bankers have sorted through the contingent liabilities and concluded earlier this month they will be unlikely to 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.
"Sharp and Foxconn have not set a signing date. Both companies are working hard to reach a satisfactory agreement as soon as practically possible," said Toyodo Uemura, a spokesman for Sharp.
Foxconn did not immediately respond to inquiries sent to its media department.
Sharp has been losing money for years and its need for financial support set off the takeover battle between Foxconn and INCJ last year. The company had ¥208.5bn in cash at the end of December.
Sharp faces the expiration of ¥510bn in credit lines and loans on March 31.
Bloomberg
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