State-backed Japan fund fights for Sharp bid

TOKYO (BLOOMBERG) - Innovation Network Corp. of Japan is making the case to Sharp Corp. that its rescue proposal for the electronics maker is worth more than an offer from Foxconn Technology Group, a sign the government fund is determined to keep fighting for victory in the takeover battle.

The state-backed fund proposed a package of cash, asset sales and support from lenders that it says is worth 1 trillion yen (S$11.9 billion), according to documents INCJ presented to Sharp and obtained by Bloomberg News. Foxconn is offering about 660 billion yen for the company, a person familiar with the matter has said.

INCJ's proposal included a 300 billion yen cash infusion for Sharp as well as 350 billion yen in support from its lenders, according to the documents. The fund also proposed raising 150 billion yen from its stake in Sakai Display Products Corp. and 200 billion yen in financing.

"Money matters, but what's important is the company's long- term viability," said Yasuaki Kogure, chief investment officer at SBI Asset Management Co. "Beyond the money amounts, the questions that need answering are about Sharp's restructuring."

Sharp fell 6.8 per cent to 165 yen in Tokyo on Tuesday, compared with a 5.4 per cent drop in the Nikkei 225 Stock Average. The stock gained 27 per cent last week.

Foxconn Chairman Terry Gou emerged from a nine-hour meeting with Sharp on Friday and said his company has become the preferred bidder, with a final agreement expected by the end of the month. About an hour later, the Osaka-based company contradicted his comments, saying that INCJ's bid is still in play.

INCJ has not given up on the proposal and is not planning to raise its offer, the fund's Chief Executive Officer Toshiyuki Shiga said in an interview with Nikkei newspaper on Monday. INCJ's focus is on restructuring and not revival makes its plan fundamentally different from Foxconn's, Shiga said in the report.

"There needs to be a board decision to give a preferred negotiating partner status," Atsushi Yoshida, a spokesman for Sharp, said following Gou's comment on Friday. "The board meeting yesterday didn't yield such status and there was no meeting today. We plan to continue our talks with INCJ." Japan Display Toyodo Uemura, a spokesman for Sharp, declined to comment. Negotiations with Sharp are continuing, a spokesman at INCJ said. Foxconn declined to comment.

The lender support in INCJ's proposal would include a 110 billion yen debt-for-equity swap, the documents show. Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc. would also cancel 225 billion yen of preferred stock they hold in Sharp, shares Foxconn is offering to buy, according to INCJ's plan.