Sharp Chooses Foxconn Over Government-Backed Fund

It might mark the end of a mostly Japanese control over one of the country's biggest LCD panel makers, a company that has held its ground for nearly a century. According to a filing made by the company, Sharp has agreed to accept Taiwanese company Foxconn's bid to own a majority stake in the company. This decision edges out Innovation Network Corporation of Japan, a government-backed fund that rescues ailing Japanese businesses and tries to turn them around. INCJ's solution, however, would have seen Sharp sold in pieces, which the company considered less favorable than having Foxconn control a still whole company.

INCJ's latest pet project was VAIO, which was sold off by Sony and is now in a more or less stable ground than before. VAIO continues to make and sell laptops, both in Japan and abroad, and has just recently unveiled its first Windows 10 Mobile smartphone. If INCJ's offer were accepted, it would spin off Sharp's other business, including its state at Sakai Display Products Corp. Sharp apparently wants to keep everything still under one roof, even if that roof is a foreign one.

Foxconn's offer also seemed more profitable anyway. While INCJ only put 300 billion yen on the table, Foxconn reportedly offered 660 to 700 billion yen, depending on who you ask. And that's just the most recent offer. Back in 2012, Foxconn was also reported to have offered 550 million yen a share for a stake in the company. Company chair and billionaire "Terry" Gou personally flew to Japan to make the appeal.

Sharp's decision to prefer Foxconn's offer has ambiguous implications for the Japanese economy. On the one hand, it strikes a big blow on the state-backed INCJ's bid to keep everything in house. On the other hand, it does strengthen Prime Minister Shinzo Abe's image of accepting foreign investments to boost the country's economy.

When the deal closes and stocks have been purchased, Foxconn will own 65.9% of Sharp. It is no secret what Foxconn plans to do with that new found capability. Best known for assembling Apple's iPhones and iPads, the company wants to go beyond that and make its own components and even devices. It also doesn't hurt to have one of the world's biggest LCD makers under your control, though pundits like DisplayMate believe, or hope, that at least the mobile industry, including Apple, is moving away from LCDs and towards OLED displays.

SOURCE: Bloomberg