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A CES attendee looks at the wall of screens in the Sharp booth

Sharp Stock Jumps After Foxconn Wraps Up Takeover

Aug. 15, 2016
After four years of haggling and rumors, Foxconn finally purchases Sharp — and sends Sharp stock rocketing to its biggest two-day gain ever (31.5%?!).

Sharp Corp. climbed in Tokyo after completing the sale of a stake to Foxconn Technology Group, ending a four-month wait for the cash-strapped Japanese maker of flat-panel televisions.

The shares jumped 10% to 117 yen ($1.16) in Tokyo on Monday. The stock has risen 31.5% in the past two days, the biggest two-day gain ever. The Osaka-based company also received a 300 billion yen ($2.97 billion) commitment line from its lenders.

Sharp agreed to a rescue package from Foxconn, choosing the Taiwanese company over a rival bid from the state-backed Innovation Network Corp. of Japan in a takeover battle that spanned four years. President Kozo Takahashi stepped down, to be replaced by Foxconn’s Tai Jeng Wu. Sharp’s liabilities no longer exceed assets after the 289 billion yen ($2.86 billion) infusion, the company said.

“With the risk of insolvency removed, the shares have a strong upward momentum,” said Hideki Yasuda, an analyst at Ace Research Institute in Tokyo. “How far they climb will depend on how Foxconn will choose to restructure Sharp. It’s not enough to optimize and cut costs, there needs to be a credible strategy for future growth.”

While Foxconn and Sharp agreed to the deal in April, it wasn’t until last week that antitrust authorities in China cleared the acquisition.

Last month, Sharp reported its seventh straight quarter of losses on shrinking sales of TVs and panels for smartphones and tablets. Display revenues plunged 38% in the three months ended June 30, while those from consumer electronics declined 24%.

The Japanese company has bet big on large-size screens, investing 1 trillion yen ($9.89 billion) to build factories in Kameyama and Sakai. As liquid-crystal display prices fell and the currency rose to a post-World War II high, Sharp shifted attention to smaller sizes for high-end smartphones and tablets. It managed to capture Apple Inc. as a customer, but orders were cut after it struggled to consistently deliver volumes.

Joining the world’s largest contract manufacturer will allow Sharp to invest in and “actively develop” new technologies in areas including communication, the Internet of Things, display, smart homes, solar energy and business solutions, the company said.

By Pavel Alpeyev

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Licensed content from Bloomberg, copyright 2016.

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