UPDATE 2-Qualcomm to invest $120 mln in Japan's troubled Sharp

Tue Dec 4, 2012 4:26am EST

TOKYO Dec 4 (Reuters) - Qualcomm Inc will invest as much as $120 million in Sharp Corp, a cash injection likely to make it the struggling Japanese TV maker's biggest shareholder, and to boost Sharp's efforts to remain viable.

As part of the agreement Qualcomm, through its Pixtronix subsidiary, will work with Sharp - which supplies screens to Apple Inc for its latest iPhone - to develop new power-saving screens based on Sharp's IGZO technology, Sharp said.

The two firms will also consider collaborating in the fabrication of chipsets.

Sharp's capital and business tie-up with the high-profile U.S. chipmaker may help reassure investors worried about the prospects of the debt-laden company that earlier this year averted failure with a $4.4 billion bank bailout .

"With this agreement Sharp will accelerate its strategy for growth in small-to medium-sized LCDs," the Japanese company said.

The investment from Qualcomm will help Sharp bolster its shareholder equity ratio, which at the end of September stood at 9.9 percent, half the 20 percent level usually considered the minimum for financial stability.

Qualcomm will make an initial investment of 4.93 billion yen ($59.91 million) by the end of the year in a private placement of stock at 164 yen per share, 10 yen less than Tuesday's closing price. That will give the U.S. company a 2.64 percent stake after dilution.

The timing and amount of the remaining investment has yet to be decided and will be conditional on Sharp returning to profit in the second half of the business year ending March 31.

Sharp, which posted a 168 billion yen operating loss in the six months ending Sept. 30, forecast a loss of 155 billion yen for the full 12 months, meaning an implied profit of 13 billion for the second half. Achieving a profit would also allow its banks, including Mitsubishi UFJ Financial Group and Mizuho Financial Group, to justify their bailout.

Sharp had been expected to make Hon Hai Precision Industry Co Ltd its biggest shareholder, adding to an earlier agreement to sell the Taiwanese company a stake in its advanced television LCD panel plant in Sakai, western Japan. That agreement, however, unravelled as losses mounted at the maker of Aquos TVs.

Talks with Hon Hai to renegotiate its investment have since stalled, but it may buy some of Sharp's overseas TV assembly plants. The Sankei newspaper reported on Sunday that Hon Hai plans to purchase three factories in China, Malaysia and Mexico for $667 million.

Sharp's shares rose 1.2 percent to 174 yen in Tokyo after the Nikkei business daily earlier reported the deal. That gain compares with a 0.3 percent dip in the benchmark Nikkei 225 index.

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