Sharp soars on report it's set to accept Foxconn offer, reject state-backed fund rescue

A man using his mobile phone walks past a logo of Sharp outside an electronics shop in Tokyo.
A man using his mobile phone walks past a logo of Sharp outside an electronics shop in Tokyo. PHOTO: REUTERS

TOKYO (BLOOMBERG) - Shares of Sharp surged after Japanese broadcaster NHK reported it planned to give preference to a rescue plan from Taiwan's Foxconn Technology Group. Sharp said there is no truth to the report that it's decided on such a restructuring.

The stock climbed 14 per cent as of 1.16 pm in Tokyo. It earlier jumped as much as 26 per cent, heading for its biggest gain on record according to data compiled by Bloomberg.

The company opted to give Foxconn - formally known as Hon Hai Precision Industry - preferred negotiating rights after the Taiwanese company increased the value of its offer to more than 700 billion yen (S$8.4 billion), NHK said without citing anyone.

A deal with Foxconn would signal a surprise victory over a Japanese-backed government fund that had been prepared to bail out the struggling display maker. Foxconn, which assembles Apple iPhones, didn't respond to an e-mailed request for comment.

Foxconn, the world's largest electronics contract manufacturer, beat out Innovation Network Corp of Japan's offer, according to NHK. The government fund had offered about 300 billion yen, people familiar with the matter have said.

If the deal goes through, Foxconn will win control of one of the largest suppliers of screens for phones and tablets. Chairman Terry Gou is seeking to broaden Foxconn's remit, transforming it into a company that also makes key electronics components and devices.

The possibility of a government bailout first surfaced in 2012, when Sharp teetered on the brink of bankruptcy after its Aquos TVs lost market share to those from Samsung Electronics, LG Electronics and lower-cost Chinese rivals.

The reported agreement with Foxconn follows years of on-off talks with the Taiwanese company, which had offered 550 yen a share for Sharp in 2012 before Sharp's subsequent forecast for a record loss caused its stock to plunge. Mr Gou had taken his case for an acquisition of Sharp directly to major lenders and the Japanese government in an attempt to head off INCJ, according to a person familiar with the talks.