Japanese electronics firm Sharp taken over by Taiwanese firm

Japanese electronics firm Sharp taken over by Taiwanese firm. February. 26, 2016 07:24. by 김지현기자, 도쿄=장원재특파원 jhk85@donga.com,peacechaos@donga.com.

Sharp, the Japanese electronics company with 104-year history, is set to be sold to Taiwan’s Hong Hai Group that has Foxconn, an OEM manufacturer of Apple’s iPhones, as a subsidiary. It is the first case in which a Japanese electronics giant is being sold to foreign capital.

Sharp held an extraordinary board of directors’ meeting on Thursday, and agreed to accept an offer to inject 5.88 billion U.S. dollars by Hong Hai Group. Sharp agreed to raise 4.36 billion dollars from Hong Hai Group by selling shares through capital increase through third party allocation. In return, Hong Hai will likely control 65.86-percent stake in Sharp, and take over major panel production lines in Japan, including Sakai Plant.

According to sources in the Korean business community, Samsung Group also formed a due diligence team two months ago and conducted inspection of Sakai Plant in a bid to take over the plant. Sakai Plant, which produces large-size displays, is the world’s only production lines for 10th generation panels. Samsung, which has production lines for eighth-generation panels, has been using panels measuring 60 inches or larger from the Japanese plant in Samsung Electronics TV sets. For this reason, Samsung expressed keen interest in acquiring Sharp.

A source in the Korean business community said, “There were equal numbers of people who support and oppose the takeover within Samsung, and hence they sent the due diligence team to take a firsthand look at the plant,” adding, “Both Sharp that opened its doors and Samsung that inspected the plant had strong intentions to form a deal.”

　 Within Samsung, there were reportedly people who opposed the deal due to the perception that investment in LCD is not promising at a time when Chinese firms are entering the market in droves, but there were also others who supported the deal by claiming that acquiring Sakai Plant would be much cheaper than constructing new production lines for 10th generation panels. Samsung vice chairman Lee Jae-yong who invested about 88.6 million dollars in Sharp in 2013, met with the head of a large Japanese financial firm late last year, and reportedly told him, “We want to buy Sharp, but the Japanese government has misunderstanding about our real intention. Please convey our real intention.”

Hong Hai also staged aggressive bid to buy Sharp. Hong Hai Chairman Terry Gou visited Sharp on February 5 and persuaded the company in person at the last minute, which helped enable his firm to clinch the deal.

Sharp, which was founded by Tokuji Hayakawa, dubbed "Japan’s Edison," developed a black-and-white TV for the first time in Japan in 1912. The company introduced the world’s first 14-inch LCD panel in 1988. The company made excessive investment in the LCD business an effort to strengthen its technological competitiveness that was lagging behind Korea’s Samsung Electronics and LG Electronics, only to face financial crunch. People and businesses in Japan are ‘shocked’ by sale to a foreign firm of Sharp, which once was a flagship technology firm of the island nation.