Foxconn considering cutting takeover offer for Sharp: Sources

A file photo of a motorcyclist riding past the entrance of the headquarters of Foxconn, formally known as Hon Hai Precision Industry Co, in Taipei.
A file photo of a motorcyclist riding past the entrance of the headquarters of Foxconn, formally known as Hon Hai Precision Industry Co, in Taipei. PHOTO: REUTERS

TOKYO (REUTERS) - Taiwan's Foxconn is working towards reducing its planned investment into loss-making Japanese electronics firm Sharp Corp by around 100 billion yen (S$1.21 billion) from an initial plan of 489 billion yen, two sources familiar with the matter said on Tuesday (March 22).

Foxconn, formally known as Hon Hai Precision Industry Co, is seeking to slash the offer to factor in a likely deterioration in Sharp's earnings in the financial year to March 31, and bigger losses in the future than originally expected, the sources said.

Both Foxconn and Sharp declined to comment.

Sharp late last month said it would issue around US$4.4 billion worth of new shares to give Foxconn a two-thirds stake, but the Taiwanese company put its takeover bid on hold at the 11th hour after the Japanese company revealed previously undisclosed liabilities.

Sharp, once a leader in high-end displays for smartphones and TVs, has struggled due to the slow pace of innovations and stiff competition from nimbler Asian rivals.

Foxconn is now considering paying less for Sharp stock from its planned 118 yen per share, but the Taiwanese iPhone assembler continues to pursue a two-thirds stake in Sharp, the sources said.

The two companies are still aiming to finalise the deal by the end of this month, according to the sources. Foxconn is also negotiating with Sharp's main creditors to trim the purchase of about half of the preferred shares owned by the banks, worth 200 billion yen in total, or offer a lower price for these shares, the sources added.

Moreover, banks are also ready to offer additional financial support to Sharp, including extending the March-end deadline and lowering the interest rate on billions of dollars in loans extended to the beleaguered Japanese electronics giant, they said.

The core banking units of Mitsubishi UFJ Financial Group Inc and Mizuho Financial Group Inc have extended the vast majority of Sharp's 510 billion yen in syndicated loans which are due at the end of the month.