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Foxconn has put its takeover of electronics maker Sharp Corp on hold after discovering previously undisclosed liabilities, sources said, throwing into doubt what was set to be the biggest takeover by a foreign firm in Japan’s technology sector.
Loss-making Sharp announced earlier in the day that it had agreed to be bought by Foxconn, a contract manufacturing firm that is a major Apple Inc supplier.
But, in a separate statement issued just hours later, Foxconn said it would not sign until it had clarified terms in a “new key document” from Sharp. It did not elaborate. Two sources with direct knowledge of the matter said the Japanese group had contingent liabilities that amounted to “hundreds of billions of yen”.
That issue would have to be resolved before a deal could be finalised, said sources, who spoke on condition of anonymity.
The sources did not elaborate on the nature of the liabilities or the exact amount.
A spokesman for Foxconn, known formally as Hon Hai Precision Industry, declined to comment on the issue.
The 11th hour delay throws into doubt a deal that would have marked the conclusion to five years of courting by Foxconn founder and billionaire Terry Gou and the opening of Japan’s insular tech sector to foreign investment.
The loss-making display maker said earlier in the day that it would issue around $4.4 billion worth of new shares to give Foxconn a two-thirds stake. Foxconn’s investment is set to total more than ¥650 billion ($5.8 billion), a separate source familiar with the matter said.
If a deal does go through, it would boost Foxconn’s position as Apple Inc’s main contract manufacturer and enable Sharp to start mass-producing organic light-emitting diode (OLED) screens by 2018, around the time Apple is expected to adopt the next-generation displays for its iPhones.
Foxconn sees ownership of Sharp as a way to better compete with Asian rivals such as Samsung Electronics.
“Sharp has the technology to build out the components to compete with Samsung as an Apple supplier, which means that with Sharp under its umbrella Foxconn can help Apple wean itself off Samsung,” said Gavin Parry, managing director of Parry International Trading, a brokerage in Hong Kong.
“This gives Foxconn better pricing power with Apple,” he added.
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