* Sharp to issue shares worth 66.9 bln yen to Hon Hai group
* Hon Hai to be Sharp's top shareholder with about 11 pct
* Sharp to sell 46.48 pct stake in Sakai plant to Hon Hai
* Under-used Sakai factory weighing on Sharp profits
By Reiji Murai and James Topham
TOKYO, March 27 Sharp Corp will issue
shares worth $808 million to Taiwan's Hon Hai Precision Industry
as part of a tie-up in liquid crystal display
production aimed at reversing losses at the Japanese firm from
declining TV sales.
The issue of 66.9 billion yen ($808 million) worth of shares
will give Hon Hai, the main manufacturer of Apple
devices, around an 11 percent stake in Sharp, making it the top
shareholder in Japan's biggest LCD maker.
Together with Sony Corp and Panasonic Corp
, Japan's three main TV makers expect to lose $17
billion this year, savaged by competition from foreign rivals
led by South Korea's Samsung Electronics.
Slumping television demand has forced Sharp to slash output
at its main plant in Sakai, western Japan, which is working at
half its capacity.
Losses from the plant, in turn, pushed Osaka-based Sharp
deep into the red in the last quarter, erasing about 180 billion
yen in equity. At end-December, Sharp's net debt-to-equity ratio
was 1.03, six times the industry average and the highest among
Japan's electronics firms, Thomson Reuters data shows.
"The electronics market is becoming severe, with rapid price
declines due to the development of digital technology and
increased competition in a global market," Sharp said. "We
believe the timely action is necessary to tackle these changes."
Sharp, which earlier this month named company veteran
Takashi Okuda as its new president, said it would issue new
shares to four Hon Hai group firms at 550 yen each, an 11
percent premium to Sharp's Tuesday close.
It will also sell a 46.48 percent stake in the Sakai plant
to Hon Hai, raising 66 billion yen from the sale.
"With the strong yen and (many other) difficulties we face,
Sharp is limited in what it can do as a single company," Okuda
told reporters at a briefing in Tokyo. "But together, the
strength of the two firms in an alliance should become a new
model to compete to win globally."
Sharp said it would use the proceeds to invest in new LCD
display technology and LCD panels for mobile devices.
Hon Hai will also buy up to 50 percent of the LCD panels
produced at the Sakai plant, Sharp said in a statement.
"This is positive for Sharp as it will allow them to share
the current deficit at the Sakai plant," said Kazuhara Miura, a
senior analyst at SMBC Nikko Securities in Tokyo.
HSBC analyst Jenny Lai in Taipei said the investment could
help Hon Hai leverage Sharp's IPS technology, which is used in
iPad and iPhone panels.
Sharp has projected a record 290 billion yen ($3.5
billion)net loss for the year to end-March as it struggles with
a slump in LCD demand. It has trimmed its forecast for LCD TV
sales to 12.8 million from a previous 13.5 million.
Sales of LCD TVs almost halved in October-December, and only
sales of TV models with screens of 60 inches or bigger in the
United States remained robust.
Sharp has been especially hammered by a glut of LCD panels
worldwide, while the yen's surge to a record against the dollar
late last year eroded its export competitiveness. That
meant it struggled to sell products from its two main LCD plants
in Japan that it doesn't use for its own TV production, forcing
it to write off 33 billion yen of inventory in the last quarter.
A slump in its own TV sales caused LCD panel inventories to
Sharp shares, which have fallen by more than a fifth since
the company forecast its record annual loss, closed up 4.4
percent at 495 yen ahead of the announcement on Tuesday.
In Taiwan, Hon Hai shares rose 1.9 percent to their highest
in more than 13 months. The stock has jumped 76 percent since
late-August when Hon Hai reported higher second-quarter revenue
and increased market share.