Sharp’s $3.5 Billion Takeover by Foxconn

104-year-old maker of products from pencil to TV to be taken control of by Taiwan based company

THE  boards of Sharp Corp. and Foxconn Technology Group approved a plan Wednesday for the Taiwanese electronics assembler to buy struggling Japanese consumer electronics giant for 389 billion yen (US$3.5 billion), a $2.5 billion cut from its original offer price. A definitive agreement for the deal is set to be signed on Saturday, followed by a news conference with Sharp Chief Executive Kozo Takahashi and Mr. Gou in Osaka, Sharp said.
The deal, ending months of negotiations between Foxconn, Sharp and the company’s creditor banks, marks a victory for the  iPhone assembler, which included an 11th-hour breakdown following revelations last month that Sharp had ¥350 billion worth of contingent liabilities, or future financial risks. The iPhone assembler has been looking to expand in the market for next-generation displays through the acquisition of Sharp, which would  allow it to move up the technology value chain by manufacturing smartphone screens, which are the most expensive components in mobile devices.

“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,” said Foxconn Chairman Terry Gou.

Foxconn plans to expand its screen production capacity, including investing in a new type of display technology known as organic light emitting diode, or OLED. Currently, Samsung Electronics Co. is the leader in OLED screen production with about 95% of the global market share, according to data from research firms. Apple is expected to use the technology in future iPhones, according to people familiar with the matter.

“Sharp owns several key display-related patents that should benefit Foxconn when expanding its own panel-making business,” said Yoshio Tamura, a senior director at IHS Technology

REVISED TERMS

Mr. Takahashi, along with other Sharp board members, are set to step down in June when Sharp shareholders are expected to vote on the deal at an annual meeting.

Under the revised terms, Sharp plans to issue new shares to Foxconn in exchange for an infusion of ¥389 billion—lower than the previous offer of ¥489 billion—which would initially give the Taiwanese company, known formally as Hon Hai Precision Industry Co., a 66% stake.

The total price includes the purchase of both common shares worth ¥289 billion and preferred shares worth ¥100 billion. Foxconn can convert the preferred shares into common shares starting in July 1, 2017, which could increase its stake in Sharp to 72%.

ABOUT SHARP

Based in Osaka, Sharp offers a range of consumer products in Japan, from desktop calculators to flat-screen TVs and refrigerators. It invented many of the world’s first tech products during its 103-year history but fell into deep financial trouble beginning in 2012, due to big investments in display screens and solar panels. Its products remain preferred choices for Japanese consumers, but Sharp hasn’t been able to expand its business globally due to a lack of resources.

Looking back at some of the products that have helped define Sharp in its 103-year history, from mechanical pencils to calculators and TVs.

 

 

A Sharp TV screen on display at an electronics store in New Taipei City, Taiwan, on Feb. 5. Photo: European Pressphoto Agency

 

Developed by Sharp’s founder Tokuji Hayakawa, the Hayakawa mechanical pencil made its debut in 1915, becoming known as the ‘Ever-Sharp Pencil.’

Launched in 1973, this pocket calculator with a liquid-crystal display was a world-first, says Sharp. Two years later, Sharp produced its 10 millionth electronic calculator

In 1925, Sharp launched what it calls Japan’s first domestically produced crystal radio, inspired by the sets that were then imported from the U.S. At the time it was developed no radio stations were in operation in Japan, and test transmissions were carried out using a manual Morse key.

 

At its launch in 1953 this was Japan’s first mass-produced TV, says Sharp. The model TV3-14T became Japan’s first commercially produced television and was priced at ¥175,000.

 

 

 

 

 

 

 

 

 

 

Sharp raised eyebrows in 2010 when it braded its LCD e-book readers ‘Galapagos.’ The devices struggled to make inroads into a market dominated by Apple’s iPad.

 

Sharp released this solar-powered calculator in 1976.

Sharp declared a technological breakthrough in 2010: Its Aquos Quattron 3-D LCD TV uses four color filters—the standard red, green and blue plus yellow.

 

Original article by Takashi Mochizuki from wsj.com

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