Sharp’s corporate board said yes to Foxconn’s proposal to take over the company, one valued at ¥700 billion or $6.24 billion. The bid had outdone a government fund’s buyout plan and now potentially takes a 103-year-old Japanese firm out of domestic ownership.
Foxconn manufactures many of Apple’s mobile products while Sharp provides the LCDs that go into them. The latter company has gone into deep financial trouble trying to turn around its production line from LCD to OLED technology. It marked an opportunity for Foxconn CEO Terry Gou to move in, claim another component to its house and embed more output to its already-large contracts with Apple. Screens are one of the most expensive parts to a smartphone.
With much-rumored plans for the iPhone of 2018 to come equipped with more power-efficient and vibrant OLED displays, Apple will need as many panels possible from as many vendors as possible. This situation gives Apple leverage on price negotiations, something that would’ve been decreased if a takeover deal from Japan Display Inc. were to happen.
Still, financial centers are wondering if Foxconn would be an appropriate suitor after all. According to Jeffries analyst Atul Goyal:
[Foxconn] doesn’t have any experience in any of Sharp’s businesses. In fact, it creates large conflicts of interest with this acquisition.The likelihood that Foxconn can use a Sharp acquisition to its advantage may boil down to the company making and selling its own devices, perhaps under the Sharp name.
Sharp lost $44 million in its last reported quarter ending in September. Foxconn made $1.16 billion in its Q3.
Source: Wall Street Journal
