Sharp has accepted a multi-billion-dollar bailout from the parent company of Taiwan’s Foxconn, media reported on Thursday, in what would be the first foreign takeover of a major Japanese electronics company.
The deal, which could be worth as much as $6.2bn, was agreed at a Sharp board meeting on Thursday, Japanese media including the leading Nikkei business daily reported.
Sharp’s volatile stock soared nearly 6% on the reports, which come after weeks of speculation about whether it would choose an offer from a domestic investment fund or Foxconn parent Hon Hai Precision, a major Apple supplier.
Sharp declined to comment on the reports, while Hon Hai could not be immediately reached.
Media reports have suggested the Taiwanese company’s offer would keep Sharp intact, while it would be broken up under a rival bid from the public-private Innovation Network Corporation of Japan (INCJ).
Despite its troubles, Sharp remains a leader in liquid crystal display technology, a key asset for Hon Hai.
The pair have worked together for years on large screen technology, including for televisions, and industry watchers applauded the rare foreign takeover of a Japanese giant.
“Hon Hai and Sharp complement each other,” said Yukihiko Nakata, a technology professor at Ritsumeikan Asia Pacific University and a former Sharp engineer.
“Sharp is strong in research and development while Hon Hai knows how to market products to customers such as Apple and it also has expertise in production … Together they can go global.”
Nakata threw cold water on the rival Japanese bid, saying it would not have been a good fit. “The only advantage was economies of scale but that alone is not enough to compete in the global market,” Nakata said.
In February, Sharp’s chief executive, Kozo Takahashi, refused to be drawn on which offer he favoured, but said his company was putting “more manpower” into evaluating the Taiwanese offer.
The government was reportedly concerned about the company’s key technologies falling into the hands of a foreign company. However, some critics warned against a government-backed bailout, pointing to Sharp as a prime example of a so-called zombie company that should be allowed to die.
Japan Inc. is littered with money-losing companies kept alive through bailouts and other assistance, partly to avoid massive job losses.
Century-old Sharp, which supplies smartphone and tablet screens to Apple but started life making belt buckles and pencils, was once among Japan’s leading companies and its brand was internationally recognised.
The company’s name once graced the jerseys of Manchester United players, but it has long since withdrawn from sponsoring the English Premier League football side.
Sharp has teetered on the edge of bankruptcy for years, piling up eye-watering losses and struggling through a restructuring plan that has yet to pull it out of the red.
In February it posted a nine-month net loss of more than $900m, hit by restructuring costs and a slump in demand for its smartphone screens.
Along with rivals Sony and Panasonic, Japan’s electronics giants have suffered steep losses in their television units owing to stiff competition from lower-cost rivals, particularly in South Korea and Taiwan.
They were also outmanoeuvred in the mobile phone business, but Sony and Panasonic have seen improving results lately.