Taiwanese manufacturing and supply firm Hon Hai Precision Industry Co, or more readily known as "Foxconn," will acquire Japan's Sharp Corporation for $5.5 billion, Reuters reports. The deal is expected to close by the end of this month and the amount that Foxconn is offering would make it the largest acquisition by a foreign company in Japan's tech sector to date.
Upon word that Foxconn chief executive officer Terry Gou had flown to Japan to meet with Sharp executives, Sharp’s shares rose 10% in a single trading session on Friday. That rise brought the shares of the struggling display maker up 28% in just two days to value the company at $2.6 billion. The fact that Foxconn is willing to pay a $3 billion premium for Sharp signals just how far the company is prepared to go to remain the major supplier and manufacturer of electronics in the world.
Sharp has been financially struggling for years as other companies have moved into its displays market. That’s something Foxconn wants to avoid with other supplier competitors, especially as Apple and other hardware tech companies are expected to release devices in the future with advanced display technologies, including flexible screens.
The Wall Street Journalsays that Gou promised to keep Sharp intact, with hopes of reviving the company, instead of breaking it up. That will keep alive the Sharp brand, which covers appliances, consumer electronics, printers, and more.
Sharp’s President Kozo Takahashi said that the company had also received an offer from the Innovation Network Corporation of Japan (INCJ ), but that the board favored Foxconn’s offer, likely due to the fact that INCJ not only was offering less than half of what Foxconn did, but also wanted to break the company up as well. Though a deal is not signed yet, the Wall Street Journal reports that Gou said the two companies have cleared 90% of the hurdles involved in the takeover and signed an agreement to give Foxconn priority negotiating rights. Gou said sealing the deal would now simply involved navigating legal and regulatory requirements. "I see no further big obstacles," he said.