Sharp to Accept Foxconn’s $6 Billion Takeover Bid

Japanese news agency Nikkei reports that on Thursday morning Sharp’s board accepted Foxconn’s takeover bid of 700 billion yen (roughly $6.2 billion). The Wall Street Journal has knowledge of an “almost $6 billion” bid and also reveals that Foxconn may yet have second thoughts about the offer.

In a statement issued a few hours later, Foxconn said it would delay signing the deal, because it “had been surprised by new information Sharp had disclosed just a day previously and needed more time to study the details.”

According to people familiar with the matter, the surprise was a list of “around 100 items of contingent liabilities, or potential future financial risks totaling around 350 billion yen ($3.1 billion), that Foxconn would assume if it completes the takeover.”

Foxconn won the Sharp board’s support through its premium offer. As for the the struggling company’s bank backers and board, Foxconn won their support through personal visits to lay out its bid, emphasizing that it would protect jobs and keep Sharp’s technology in Japan.

Under the deal, Sharp would issue new shares to Foxconn in exchange for an infusion of 489 billion yen. Foxconn would purchase preferred shares held by the two bank backers (Mizuho Financial Group and Mitsubishi UFJ Financial Group) for 100 billion yen. Other payments would total around 70 billion yen, raising the deal’s total to 659 billion yen ($5.9 billion).

Since the surprise element was thrown in, Foxconn needs time to consider how it would reverse Sharp’s heavy losses. However, it is worth noting that if the two giants join forces, Foxconn would be in a better position to develop screens for Apple’s iPhones, and Foxconn CEO Terry Gou is eager to grab that manufacturing cost of roughly 20% of every single iPhone made.