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source from:WSJ website
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Foxconn’s Price Tag for Sharp Likely to Fall by More Than $2 Billion
Company boards to meet separately Wednesday
By WAYNE MA in Hong Kong and TAKASHI MOCHIZUKI in Tokyo
March 29, 2016 2:34 a.m. ET
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The boards of Sharp Corp. and Foxconn Technology Group will meet separately on Wednesday to discuss a revised takeover package that could slash at least 245 billion yen ($2.16 billion) off the price tag for the troubled Japanese electronics maker, people familiar with the matter said.
Under the new terms, which people familiar with the matter said are still under negotiation and could change, Sharp would issue new shares to Foxconn in exchange for an infusion of ￥389 billion for about a two-thirds stake, down from Foxconn’s original offer of ￥489 billion.
To make up for the shortfall, the people said Sharp’s two main lenders, Mizuho Bank and Bank of Tokyo-Mitsubishi UFJ, would offer a credit line of ￥300 billion to Sharp, which makes everything from televisions to solar panels to screens for Apple Inc.’s iPhones.
The two banks, which have held ￥200 billion worth of preferred Sharp shares since they bailed the company out last year, would let Foxconn delay buying those shares for about three years, the people said.
Foxconn, known formally as Hon Hai Precision Industry Co., originally offered to buy half the shares for ￥100 billion.
The people said a side agreement for Foxconn to pay ￥45 billion for the land beneath Sharp’s advanced display panel factory in Sakai, Japan, was canceled, according to the revised terms. The people said discussions with Sharp’s two main lenders over revised terms for Sharp’s ￥500 billion in bank debt—such as lowering interest rates on the loans and lengthening the payback schedule—are continuing.
Foxconn and Sharp are tentatively planning to announce an agreement at a news conference that could come as early as Saturday, people familiar with the matter said.
In a statement, Foxconn said it would hold a regular board meeting on Wednesday, though discussions about Sharp would depend on the progress of the negotiations. A Sharp spokesman said it is working with Foxconn to reach an agreement as soon as possible.
Some Sharp board members, including Chief Executive Kozo Takahashi, are expected to step down once the deal is approved by Sharp shareholders in June, one of the people said.
Sharp on Monday announced that Tetsuo Onishi, an executive vice president in charge of restructuring its display business, will step down Thursday.
People familiar with the matter said the revised terms came due to the extra time Foxconn had to conduct due diligence. Over the past month, Foxconn has sent hundreds of people to take stock of everything from Sharp’s information-technology infrastructure to its inventories, two of the people said, adding that the teams have uncovered issues related to factory overcapacity and China sales that helped to convince Sharp’s lenders to agree to revised terms.
Sharp declined to comment on details of the negotiations, including what the company has discovered through the due diligence process.
For the fiscal year ending this month, Sharp is expected to report a net loss of ￥200 billion, people familiar with the matter said, due to weaker sales of display panels and an extraordinary one-time loss. In the previous fiscal year, Sharp posted a loss of ￥222 billion.
Sharp’s board initially approved a package from Foxconn to buy the floundering Japanese company for ￥659 billion in late February. However, Foxconn left Sharp standing at the altar after the Taiwanese company received a document from Sharp outlining an additional ￥350 billion worth of contingent liabilities—or potential future financial risks—that hadn’t previously been disclosed, according to people familiar with the matter.
—Atsuko Fukase in Tokyo and Eva Dou in Beijing contributed to this article.
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