Japan's Sharp accepts Taiwanese offer in rare foreign takeover

TOKYO - Money-losing Sharp on Thursday accepted a multi-billion-dollar bailout from the parent of Taiwan's Foxconn, ending speculation over its uncertain future with the first foreign takeover of a major Japanese electronics firm.

Sharp - which has teetered on the edge of bankruptcy for years - had been mulling rival offers from Taiwan-based Hon Hai Precision and the public-private Innovation Network Corporation of Japan (INCJ).

On Thursday, its board unanimously chose the rescue package from colourful billionaire Terry Gou, whose firm is the world's biggest electronics supplier counting iPhone maker Apple among its top clients.

Japan's government was reportedly concerned about Sharp's key technologies falling into the hands of a foreign firm.

Despite its bleeding balance sheet, Sharp is still a leader in liquid crystal display (LCD) technology and the firm remains one of Japan's best-known corporate brands overseas.

Gou held meetings with Sharp this month at its headquarters in Osaka, declaring a deal was all but done. But Sharp's chief refused to show his hand, insisting both offers were being considered seriously.

Under the deal Hon Hai, better known as Foxconn, will take a 65.9 per cent stake in Sharp worth 489 billion yen (S$61 billion). Media reported the value of the deal could reach 700 billion yen if it includes Sharp's debt.

Sharp's volatile stock dived nearly 15 per cent to 149 yen in Tokyo on fears the deal would dilute the value of current investors' shares, although analysts cheered the tie-up.

"Hon Hai and Sharp complement each other," said Yukihiko Nakata, a technology professor at Ritsumeikan Asia Pacific University and a former Sharp engineer.

"Sharp is strong in research and development, while Hon Hai knows how to market products to customers such as Apple and it also has expertise in production... Together they can go global." The pair have worked together for years on large-sized screen technology, including for televisions, and jointly operate an LCD panel plant in Japan.

"This is a win-win for Hon Hai and Sharp with respect to the Apple business," Taiwan's Fubon Securities said in recent analysis.

Media reports suggested the Taiwanese firm's offer would keep Sharp intact, while it would be broken up under the rival Japanese bid.

"The only advantage (of the Japanese offer) was economies of scale, but that alone is not enough to compete in the global market," Nakata said.

While the deal may keep Sharp in business, it is a blow to Japan's once mighty electronics sector.

Along with rivals Sony and Panasonic, Japan's electronics giants were hammered by steep losses in their television units owing to stiff competition from lower-cost rivals, particularly in South Korea and Taiwan.

They were also outmanoeuvred in the mobile phone business, and critics have seen Sharp as a prime example of a so-called zombie company that should be allowed to die.

Japan Inc. is littered with money-losing firms kept alive through bailouts and other assistance, partly to avoid massive job losses.

Century-old Sharp, which also supplies smartphone and tablet screens to Apple but started life making belt buckles and pencils, was among Japan's leading firms with an internationally recognised brand.

The company's name once graced the jerseys of Manchester United players, but it has long since withdrawn from sponsoring the English Premier League football club.

Sharp piled up eye-watering losses after the 2008 global financial crisis and has struggled through a restructuring plan that has yet to pull it out of the red.

Saddled with huge debts, the firm this month posted a whopping nine-month net loss of more than US$900 million (S$1.2 billion), hit by restructuring costs and a slump in demand for its smartphone screens.