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Sharp in acquisition turmoil

Sharp in acquisition turmoil

February 26, 2016

The OEM had accepted Foxconn’s buyout, worth $6.2 billion (€5.6 billion), but at the last minute the latter halted the acquisition for further talks.

Sharp's head office

Sharp’s head office

Nikkei had reported on Sharp’s board accepting Foxconn’s buyout offer, with the Japanese OEM intending to “restructure its operations under the umbrella of the Taiwanese contract manufacturer”, while details “ha[d] yet to be announced” of the full arrangement. The news site pointed out that Sharp “had faced a choice” between Foxconn and a Japanese state-backed fund, details of which had been revealed in January.

This would have seen a restructuring and bailout costing around $3 billion (€2.7 billion), and the OEM also indicated at that point that it was “in talks with various companies about [its] LCD business but no decisions have been reached”. Earlier this month, The Recycler reported that Foxconn and Sharp had been in talks, but no decision had been made at the time.

However, Reuters stated that the deal had been “put on hold”, with the CEOs of both companies to meet in China after Foxconn. At the “11th hour”, according to a source, Foxconn halted the takeover because of “previously undisclosed liabilities”, and needing to clarify “new material information”, though the company refused to elaborate any further.

The decision came “just hours” after the acquisition had been announced, with Reuters adding that this is “rarely heard of in major M&A talks”, and has “thrown [the deal] into doubt”. Further sources stated that Sharp has “contingent liabilities” worth around $2.7 billion (€2.4 billion), which “contrasts with Foxconn’s own due diligence” that had revealed a much lower amount. Sharp in turn stated that it had been “disclosing its contingent liabilities properly”, while Foxconn declined to comment.

Analyst Atul Goyal told Reuters that “the entire deal was in jeopardy”, while Sharp’s creditor banks confirmed “they were also not aware of the size of the contingent liabilities until the last minute”.

In January, Sharp denied rumours that it would be selling its copier business, whilst in November 2013 the OEM was rumoured to possibly be entering into an OEM deal with HP to make copiers, while further reporting established that both companies would collaborate on “toner and other supplies”.

Also, in August 2013, Sharp called off talks with Samsung over potentially setting up a joint copier sales company following opposition from other Japanese OEMs.

Categories : World Focus

Tags : Business Foxconn Sharp

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