Deadline approaches for Foxconn-Sharp buyout

By Ted Chen, The China Post

TAIPEI, Taiwan — As the end of March deadline approaches, Foxconn Chairman Terry Gou has personally arrived in Japan for a final attempt at negotiation to acquire a 9.9-percent stake in Sharp, according to reports.

Gou will meet with Sharp leaders Mikio Katayama (片山幹雄) and Takashi Okuda (奧田隆司) to finalize the deal, representing the first contact between the leaders since negotiations fell into a stalemate 7 months ago. The talks will include the terms of the transferal of ownership stakes and the price per share of the acquisition, according to reports.

Industry observers expect an outcome in the next two days. According to speculation, Gou has garnered the support of a number of Japanese banks, who have thus far been the greatest backers of the ailing Sharp, representing a tremendous bargaining chip for Foxconn in the upcoming negotiations.

If the deal was to go through at the 300-yen-per-share mark — the current worth of Sharp shares — the terms would remain quite attractive or at least on par with precedents for Sharp, considering that its earlier deals with Qualcomm and Samsung were completed at 164 and 290 yen per share, respectively.

At a 9.9-percent stake, Foxconn would be rendered Sharp’s largest stake holder, compared to Qualcomm’s 5.2 percent, and Samsung’s 3.08 percent, which exceeds by a wide margin Sharp management’s internal holdings. Moreover, coupled with the support of Sharp’s Japanese banking backers, it is likely that Foxconn will not forgo its right to assert influence as mandated by its status as the company’s largest stakeholder, which represents the greatest obstacle for the deal, according to reports.

Institutional investors yesterday spoke in support of Foxconn, expressing indifference toward the recent developments between the company and Sharp. Foxconn’s margins are improving, said the institutional investors, while citing the company’s efforts in reducing its labor costs by leveraging the benefits of automation in its manufacturing processes. Consequently, Morgan Stanley increased its target price for shares of Foxconn from NT$111 to NT$117, while UBS was quoted as saying “Forget about it” on the possible failure of Foxconn’s 9.9-percent acquisition bid for Sharp. Foxconn shares continue to hold their ground, closing down NT$0.1 at NT$80.4 at the end of yesterday’s session.