Foxconn, Sharp planning to ink $6bn takeover tomorrow

Foxconn Technology Group and Sharp Corp are aiming to sign their $6bn takeover agreement as early as tomorrow after deciding the deal won’t require major changes, according to people familiar with the matter.
The two sides have been going through a list of potential liabilities and concluded they will be much less than initial concerns they could exceed ¥300bn ($2.6bn), said the people, who asked not to be identified because the matter is private. That would pave the way for Foxconn to proceed with its proposed deal of paying about ¥500bn for a majority stake in Sharp, along with additional payments for preferred shares.
Foxconn chairman Terry Gou has pursued Sharp since at least 2012 and had appeared on the verge of grasping his prize when the Japanese company’s board approved his deal last week. But Foxconn a few hours later said it would postpone the final agreement until it had got to the bottom of material new information provided by Sharp just a day earlier. That information is about contingent liabilities that the company could incur through layoffs or restructurings, people familiar with the matter have said.
Sharp has been losing money for years and its need for financial support set off the takeover battle last year between Foxconn and the government-backed Innovation Network Corp of Japan. The company’s cash totalled ¥208.5bn at the end of December, and it is projected to lose more than ¥100bn in the fiscal year that ends this month, according to data compiled by Bloomberg.
Sharp also faces the expiration of ¥510bn in credit lines and loans on March 31. The company’s banks have pushed for a bailout agreement before those loans are renewed, people familiar with the matter have said. The banks, Mizuho Financial Group and Mitsubishi UFJ Financial Group, could finish the renewals by the deadline if Sharp and Foxconn reach final terms next week, said the people.
Terms for Sharp’s creditors may be revised from the original takeover agreement, the Wall Street Journal reported Friday, without specifying what those changes could be.
Foxconn declined to comment, repeating its February 28 statement that neither side has set a signing date and are working to reach a satisfactory agreement. Yoshifumi Seki, a spokesman for Sharp, also declined to comment.
Sharp shares rose 9.4% to ¥151 at the close of trade in Tokyo. The shares have gained 21% in 2016 after posting annual declines in five of the past six years.