March 30, 2016
The Taiwanese company has purchased the OEM for a “reduced” price after issues emerged during the acquisition process.
Bloomberg reported on the completion of the deal, which saw Foxconn acquire Sharp “after years of pursuit” in a “reduced buyout”. The Recycler reported last week that Foxconn had reduced its offer “by around” $900 million (€804 million), having initially planned to invest ¥489 billion ($4.3 billion/€3.8 billion) in the struggling OEM, and now planning to lower the price of new share offers.
The completed deal has seen Foxconn acquire a controlling stake in Sharp for ¥389 billion ($3.4 billion/€3 billion), and it will get 66 percent of the OEM for ¥88 ($0.78/€0.69) per share, capping “weeks of drama” as the acquisition stumbled. The OEM had accepted the buyout, worth $6.2 billion (€5.6 billion), but at the last minute Foxconn halted the acquisition for further talks.
According to sources, this was because of “previously undisclosed liabilities”, and needing to clarify “new material information”. Other sources stated that Sharp had “contingent liabilities” worth around $2.7 billion (€2.4 billion), which “contrast[ed] with Foxconn’s own due diligence” that had revealed a much lower amount.
However, earlier this month the deal was back on, with Foxconn Chairman Terry Gou travelling to Japan to hold “late-stage talks” with Sharp executives, and “both sides [were] seeking to conclude”. As part of its new scrutiny of Sharp’s operations, Foxconn had “dispatched a team to Sharp’s headquarters, plants and other places”, and apparently “concluded that the contingent liabilities, which could be incurred in the future, do not pose a serious threat”.
Later developments had again seen the deal in the balance, as Foxconn was “seeking guidance” from Sharp on its last quarterly performance as part of efforts to “finalise” the acquisition. Sources noted that “investors [were] on edge about prospects for the deal”, with concerns that it is “dragging out” affecting share prices, but Foxconn was said to be “unlikely to walk away given its deep desire to gain control of Sharp’s advanced screen technology”.
Now with the deal complete, Bloomberg surmised that Foxconn’s total payment “will probably increase”, with the initial agreement laying out that Foxconn would “spend an additional” ¥100 billion ($887 million/€784 million) to “acquire preferred stock from Sharp’s main banks”, though neither company “discussed that transaction” when announcing the deal this week. There is also a clause that allows Foxconn to buy Sharp’s display business “if the deal falls apart anytime before 5 October”.
If that were to happen, Sharp would give Foxconn or a third party “designated” by Foxconn, “exclusive negotiation rights for three months to buy the unit”. Two of the 13 Sharp directors voted against the deal, which was said to be an “unusual sign of protest in consensus-driven Japan”, while Gou commented that “we have much that we want to achieve and I am confident that we will unlock Sharp’s true potential and together reach great heights”.
Categories : City News