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Foxconn seeking guidance on Sharp fourth-quarter, deal may not come this week: source
March 16, 2016 / 1:40 AM / 2 years ago

Foxconn seeking guidance on Sharp fourth-quarter, deal may not come this week: source

TAIPEI/TOKYO (Reuters) - Taiwan’s Foxconn is seeking guidance from Japan’s Sharp Corp on its latest quarterly performance as part of its efforts to finalize a planned acquisition of the ailing electronics maker, a person familiar with the matter said.

A man walks past Sharp Corp's liquid crystal display monitors showing the company logo in Tokyo, Japan, February 25, 2016. REUTERS/Yuya Shino

Investors are on edge about prospects for the deal - estimated to be worth nearly $6 billion - after a last-minute hitch last month over potential liabilities at Sharp. Concerns that the process is dragging out helped send the display maker’s shares tumbling 12 percent on Wednesday.

A signing of the deal may not happen this week, people with the knowledge of the matter told Reuters although they added that Foxconn was unlikely to walk away given its deep desire to gain control of Sharp’s advanced screen technology.

Sources spoke on condition of anonymity due to the sensitivity of the matter.

Foxconn declined to comment. A Sharp spokesman said that both companies are working hard to reach a satisfactory agreement as soon as practically possible.

Bringing Sharp under its wing would allow Foxconn, formally known as Hon Hai Precision Industry Co, to strengthen its pricing power with major client Apple Inc and give Sharp access to the Taiwanese firm’s wide distribution channels.

The logo of Sharp Corp is seen above Chinese tourists standing outside an electronics retail store in Tokyo, Japan, in this February 26, 2016 file photo. REUTERS/Yuya Shino/Files

But a history of mutual distrust dating back to a failed deal in 2012 lingers between the two firms, raising questions about how successful the acquisition will be, even if completed.

In addition to guidance for the current quarter, Foxconn is waiting for auditors and accountants of Sharp to confirm whether the liabilities it has uncovered in its due diligence through the end of 2015 is “in the right ballpark,” the first person said.

Slideshow (2 Images)

In early February, Sharp said it expected an operating profit of 10 billion yen ($88 million) for the year ending in March. But it is widely expected to fall short of that forecast originally set in October last year, as it reported a nine-month operating loss of 29.04 billion yen.

Sharp is due to announce annual results in late April or early May.

Sharp chose Foxconn as its preferred bidder in February over state-backed fund, the Innovation Network Corp of Japan, which had planned to merge Sharp’s display business with rival Japan Display.

Japan Display said on Wednesday it would close two domestic liquid crystal display (LCD) production lines as it seeks to boost profitability and raise funds for next-generation technologies.

Reporting by J.R. Wu and Makiko Yamazaki Additional reporting by Taro Fuse; Editing by Edwina Gibbs

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