The Taiwanese firm has offered to invest nearly 659 billion Yen (US$5.6 billion) in Sharp. Mostly Foxconn will keep the Sharp group intact, only shedding the battery business.
For Foxconn, this bid to acquire Sharp will serve as an investment in growth; helping it to cut its dependence on Apple as the contract manufacturing market slows its pace. Sharp's business of making small and mid-sized LCD panels for smartphones has turned out to be profitable. Selling display panels built with Sharp's technology at economical prices would help Foxconn cultivate a larger consumer base.
Foxconn's group sales increased by about 6% to 4.48 trillion New Taiwan dollars (US$134 billion), missing the 10% target. The company is endeavouring to generate sales of NT$10 trillion in the near future.
Sharp and Taiwan's Hon Hai have continued their negotiations. However, several points of contention have cropped up. According to a Sharp Director, the fate of Sharp's solar cell business has raised concerns. Reportedly, the Taiwanese company has informed Sharp that its main business will stay unaffected after the acquisition. However, Hon Hai Precision Industry's CEO, Terry Guo, did indicate his intention to spin-off Sharp's solar cell operations. Sharp had also assumed that the rescue plan would steer clear of job cuts. But Guo said that employment will be secure for employees aged 40 and below. Sharp's uncertainty is backed by history. Four years ago, Hon Hai Precision Industry had agreed to invest in Sharp. But the Taiwanese company asked for a renegotiation after Sharp's stock price fell, causing the deal to go sour.
Sharp is also keeping its communications channel open with INCJ, which has made an alternate offer. INCJ (Innovation Network Corporation of Japan) has stated that it will rescue Sharp with plans to align its display business with Japan Display in which INCJ holds a majority stake. INCJ said that the idea was to create a global competitive Japanese LCD maker. According to INCJ's CEO, the two rescue plans by Hon Hai and INCJ are completely different. Under this plan, up to 150 billion Yen (US$1.34 billion) of Sharp's outstanding debt to its two main bank lenders would be converted to equity while as much as 200 billion Yen would be virtually written-off. One of the lenders—Mizuho Bank—has made its displeasure evident against the implementation of this idea. If Sharp opts for this plan, it might struggle to win over the banks. With its earnings showing no signs of improvement, Sharp cannot afford an error in making the right decision.