A potential tie-up between two important Apple suppliers in Asia, Foxconn and Sharp, was cast into doubt on Thursday. For a few hours today, it seemed like Sharp, the Japan-based consumer electronics company, had secured a $5.5 billion takeover from Taiwan’s Foxconn, the giant contract manufacturer for Apple products.
The Japanese electronics company is struggling to survive and said it had agreed to be acquired by Taiwan's Foxconn. The giant manufacturer would buy shares in Sharp worth nearly $5.25 billion under the agreement. Hours later, things took a left turn.
Foxconn called the whole deal into question.
Foxconn unexpectedly said that it needed to review last minute disclosures before signing the agreement on Thursday. Its hesitation was mainly due to Sharp’s huge loss over the last several years and anyone who hopes to turn the loss around.
It’s a tough decision to buy Sharp for the giant manufacturer since it faced the competition against an investment fund backed by the Japanese government. Furthermore, its bid has been seen as a test of Japan’s willingness to open up to foreign investment. The door remains open for a deal. If Foxconn signs the agreement, it would be the largest acquisition of a Japanese consumer electronics company by an overseas buyer.
It’s unclear that how significant the disclosures were to threaten the deal. But the hesitation that Foxconn shows at the last minute certainly raised doubts about what might be in Sharp’s books.
“Maybe Foxconn found something they didn’t like, or maybe there’s just a lot to go through,” said Nicholas Benes, a Tokyo-based specialist in Japanese corporate governance.
As part of the deal, Sharp intends to issue new shares. This is something that would require a thorough disclosure of any business risks facing the company, such as potential future costs or financial forecasts.
“The rules are stricter when you’re issuing new shares,” Benes said.
Besides Foxconn, Sharp had also talked with other companies, such as Innovation Network Corporation of Japan, to seal the best deal from the mergence.