March 8, 2013 / 9:00 AM / 7 years ago

Hon Hai won't invest in Sharp by March 26 deadline: media

TOKYO (Reuters) - Hon Hai Precision Industry Co Ltd will not invest in Sharp Corp by a March 26 deadline after the two firms failed to revise an earlier agreement, although the Taiwanese company has not ruled out an investment altogether, a newspaper said.

A man looks around Sharp's TV sets at an electronic shop in Tokyo February 1, 2013. REUTERS/Yuya Shino

Hon Hai Chairman Terry Gou met Sharp’s bankers to inform them no deal would be struck this month but he would look at the merits of an investment after the struggling Japanese display maker unveils a new business plan in the near future, the Asahi newspaper reported without saying where it got the information.

Talks for Hon Hai to buy as much as a 9.9 percent stake had stalled after Sharp balked at its demand that it be given a degree of management control.

Hon Hai also sought to lower the $708 million price tag after Sharp’s stock slumped in the wake of losses that prompted a bailout from its banks last year.

Sharp’s banks, which include Mizuho Financial Group Inc and Mitsubishi UFJ Financial Group Inc, had not been expecting a revised deal, sources told Reuters last month.

Sharp spokeswoman Miyuki Nakayama and a spokesman for Hon Hai both said the two companies would continue to negotiate until the deadline.

As talks with Hon Hai unraveled, Sharp concluded smaller investment deals with Samsung Electronics Co Ltd and Qualcomm Inc. It may also have to find other ways to raise money to repay a $2.1 billion convertible bond due in September.

Sources at Sharp and its banks as well as analysts have told Reuters they expect the company will resort to equity financing to make up any shortfall after it adds up available cashflow and gains from asset and stake sales.

Its scope for asset sales, however, is limited because it had to mortgage nearly all its domestic factories and offices to secure emergency bank loans. A junk credit rating makes bond issues an expensive proposition for the Japanese TV pioneer.

Under the deal with Samsung announced this week, the South Korean company will take a 3 percent stake for around $110 million and Sharp will supply it with screens for its TVs and mobile devices. That deal followed an agreement in December for Qualcomm to invest as much as $120 million.

Sharp is also in talks to sell its Chinese TV assembly plant to Lenovo Group Ltd and to sell its Mexico factory to Hon Hai, according to sources familiar with the discussions. Hon Hai already owns a third of Japan’s liquid crystal display plant in Sakai western Japan, the world’s most advanced display factory.

($1 = 94.6650 Japanese yen)

Reporting by Tim Kelly; Editing by Edwina Gibbs

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