Hon Hai denies reports Sharp bailout deal to be signed March 31
By Shigeru Sato Takashi Amano and Andrea Tan
Hon Hai Precision Industry Co. Foxconn Technology Group’s flagship company on Sunday denied media reports that the bailout of Sharp Corp. will be approved and signed on March 31 a day after Hon Hai’s board meets.
Progress in talks to acquire troubled Japanese electronics maker Sharp will determine whether the deal is discussed at the board meeting which will go ahead as scheduled Hon Hai said in a statement to the Taiwan stock exchange.
Sharp’s banks are ready to push back the deadline for most of the company’s 510 billion yen ($4.5 billion) in loans and credit lines beyond March 31 people with knowledge of the matter said earlier. That would give the Japanese maker of Aquos televisions more time to reach a renegotiated deal to be acquired by billionaire Terry Gou’s Foxconn.
The extension may be as long as a month said the people who asked not to be identified as the decision hasn’t been publicly announced. Gou agreed a month ago to buy Sharp for more than 600 billion yen but has held off on signing a final agreement while his advisers scrutinize the company’s finances.
While the wrangling has raised the risk of the deal falling apart extra time from Sharp’s lenders will reduce the likelihood it will miss loan payments and face a dire situation such as liquidation. Foxconn is seeking to cut the amount it will pay for equity in Sharp to about 389 billion yen one person said. The Taiwanese company will probably still pay about 100 billion yen for preferred shares that the banks own though the payment may be delayed the person said.
Sharp along with the banks is aiming for its directors to endorse a final proposal by March 31 one person said although the board could meet for a vote earlier if a deal is presented. At the same time an extension by the banks would give Sharp more time to negotiate a final agreement in April.
Toyodo Uemura a spokesman for Tokyo-based Sharp Mizuho Financial Group spokeswoman Masako Shiono and Taiki Kitaura a spokesman for Mitsubishi UFJ Financial Group declined to comment over the weekend.
Sharp and Foxconn are set to approve the revised bailout plan at their board meetings on March 30 and sign the acquisition agreement the following day Nikkei reported Saturday.
Foxconn will put down a 100 billion yen deposit upon signing the agreement while cutting the amount it will pay for Sharp’s equity by 100 billion yen according to Nikkei.
Foxconn also plans to help Sharp pay back the 510 billion yen in loans at an interest rate no higher than 0.6 percent and push back the timing to buy preferred shares owned by Mizuho and Mitsubishi UFJ’s lending units by three years Nikkei said citing unidentified sources. The banks have also agreed to give Sharp a new credit line of 300 billion yen according to the newspaper. Yoshifumi Seki a spokesman for Sharp declined to comment on the report.
Foxconn and Sharp have said they’re working toward a final agreement. A month has passed since Sharp’s board backed Foxconn’s bailout over a competing offer from Innovation Network Corp. of Japan. Since then Gou has put the brakes on the deal while he seeks more clarity on Sharp’s performance in the current quarter people familiar with the matter have said.
A reduction in the value of Foxconn’s offer would put it closer to the bid from INCJ. The Japanese government-backed investment fund had offered about 300 billion yen for Sharp all of which would have been put into the company through the purchase of additional shares. Sharp hasn’t gone back to INCJ to seek another bid the people said.
Toshimitsu Irie a spokesman for INCJ declined to comment.
Sharp said Friday its annual earnings probably missed forecasts on a deterioration of demand in China. The company had said it would have operating profit of 10 billion yen in the financial year ending this month while the average of analyst estimates is for a loss of 23.9 billion yen.