Hon Hai's Gou aims to reach Sharp deal this week

TOKYO Mon Aug 27, 2012 3:14pm IST

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TOKYO (Reuters) - Taiwan's Hon Hai Precision Industry (2317.TW) Chairman Terry Gou said an agreement to buy a 9.9 percent stake in Sharp (6753.T) was unchanged "in principle," and that he hoped to conclude the deal with the struggling Japanese TV maker this week.

The two firms reached a deal in March valuing the shares of the cash-starved maker of Aquos TV at 550 yen each, but reopened talks this month after Sharp's stock slumped to around a third of that price as losses mounted.

Without the full 67 billion yen ($852 million) that the Taiwanese firm agreed to pay in March, Sharp would have to rely more on its banks or sell other assets to bolster its finances.

"I can't say anything before we come to a conclusion, (but) in principle, no changes," Gou said at Tokyo's Haneda Airport on Monday, without going into details.

He added, however, that what was more important than the size of the stake or the share price was how to improve Sharp's productivity through "strategic cooperation."

"This is our goal," he said.

The companies would stick to the 9.9 percent plan agreed in March, Japan's Yomiuri newspaper reported on Monday, quoting Sharp President Takashi Okuda as saying in an interview.

A larger stake of 10 percent or more would give Hon Hai the right to ask Japanese courts to break up the century-old company.

Okuda, in the Yomiuri interview, "did mention that our position of having a 9.9 percent investment ratio from Hon Hai still exists," Sharp spokeswoman Miyuki Nakayama said.

"We don't know if it will be agreed this month."

Gou, who was in Japan as part of a Taiwanese delegation of businessmen and politicians, later told reporters at a briefing that he would meet with Sharp executives from Thursday and hoped to conclude the deal this week.

Shares of Sharp jumped as much as 6 percent to 204 yen, the highest since August 13, following the newspaper report, on hopes that the deal remained intact and Sharp would get added financing from its creditors.

MAY SELL TV PLANTS

Like rivals Sony Corp (6758.T) and Panasonic Corp (6752.T), Sharp has been hammered by waning global TV demand and aggressive overseas competitors led by Samsung Electronics (005930.KS) that are grabbing a bigger slice of a shrinking pie.

Sharp may seek to raise extra cash from its Taiwanese partner by selling it two TV assembly plants, one in Mexico and one in China, employing around 3,000 people, Sharp's spokeswoman confirmed.

Gou did not comment on arrival when asked whether Hon Hai would purchase the plants.

The Hon Hai chairman has already purchased a 47 percent stake in Sharp's TV panel plant in Sakai, western Japan, helping the Japanese company lessen its exposure to losses at the facility.

Gou will visit the Sakai factory on Thursday, Taiwan's de facto embassy told Reuters.

Gou, 61, founded Hon Hai in 1974 as a maker of plastic parts for TVs and video game consoles. The business has grown since into one of the world's major builders of TVs, tablets and other consumer devices for other companies, including Apple (AAPL.O).

Forbes magazine in May ranked Gou, who reportedly owns a castle in Europe, as Taiwan's fourth-richest person, worth an estimated worth of $4.8 billion.

SHARP'S CASH NEED

Sharp, with debt of 1.25 trillion yen, holds 360 billion yen of short-term loans and needs to refinance a 200 billion yen convertible bond in September next year.

The company is seeking help from its main banks, Mizuho Financial Group (8411.T) and Mitsubishi UFJ Financial Group (8306.T).

Those lenders will provide 250 billion in loans to Sharp by the end of March, with four insurance companies, including Nippon Life Insurance, providing an additional 100 billion, enough for the TV maker to cover its immediate debt obligations, the Nikkan Kogyo newspaper reported on Monday without citing sources.

Mizuho and Mitsubishi UFJ provided 66 billion yen in unsecured loans to Sharp in July, and this month have made as much as 150 billion yen available to the company, which it must back with collateral, a source at one of the banks told Reuters. The source said he had not heard about any additional amounts from insurers.

Other assets Sharp could sell include an office building in Tokyo that the company vacated this month, which analysts estimate could be worth around $500 million.

The company also holds around 40 billion yen in marketable securities, including stakes in car navigation maker Pioneer (6773.T), Toshiba Corp (6502.T) and medical equipment maker Olympus Corp (7733.T).

Shares in Sharp, which have fallen by more than two-thirds since January, closed up 2.6 percent at 197 yen on Monday, outpacing a 0.2 percent rise in the benchmark Nikkei average .N225. ($1 = 78.6500 Japanese yen)

(Additional reporting by Taiga Uranaka, Chang-Ran Kim and Mari Saito; Additional writing by Linda Sieg; Editing by Chris Gallagher)

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