Foxconn agrees to acquire controlling interest in Sharp for $3.5 billion

Foxconn logoOn Wednesday morning, Bloomberg and Reuters reported that the struggling Japanese giant Sharp had sold a two-thirds stake to Foxconn, the world’s largest electronics contractor manufacturer, for 389 billion Japanese yen ($3.5 billion, £2.4 billion).

The offer is about $1 billion less than what Foxconn had been expected to offer last month.

The deal, if it is formally approved by both corporate boards, is expected to represent a crowning achievement for Foxconn Chairman Terry Gou, who hopes that his newly enlarged firm can become a major supplier of smartphone screens. At the moment, Sharp is one of just three screen suppliers to Apple.

In a 45-page February 2016 statement to investors, Sharp wrote:

Sharp recorded large deficits for the year ended March 2015, due to a lack of measures, such as rapid business changes, against the intensified competition in the LCD TV business in America, and the deterioration in the business environment for the energy solution business, including stagnant demand for solar power, as well as a lack of foresight in responding to market changes, including the fact that the shift to high-definition products did not take off, inadequacy in dealing with price declines, and inadequacy in marketing for the small- and medium-size LCD market, as well as recording of the allowance for the price difference in long term contracts for polysilicon materials used in solar panels, whose prices are higher than the market price, and incorporating the difference from the market price of small- and medium-size LCDs as a write-down of the inventories to improve earnings structure.

Sharp is still a risky purchase for Foxconn. In the fiscal year ending March 2015, Sharp suffered a net loss of ¥222 billion ($1.9 billion, £1.4 billion). Its most recent half-year results weren't particularly positive either, posting an operating loss of ¥25.2 billion ($224 million, £156 million).

Source: Ars Technica

Tags: Foxconn, Sharp

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