Hon Hai May Make 60% Savings for Buying Into Sharp
Hon Hai Group and Sharp of Japan reportedly have reached the final stage in the renegotiation of their cooperative conditions. Terry Guo, chairman of Hon Hai, is scheduled to fly to Japan next week and may publicize a joint statement with Sharp for the cooperation. Market players estimated that Hon Hai may buy into Sharp at 200 Japanese yen per share, less than 40% of the original price of 550 yen.
Hsing Chih-ping, Hon Hai spokesman, confirmed that Terry Guo will join a delegation of the Ministry of Economic Affairs (MOEA) to visit Japan next Monday (Aug. 27), when he will make final confirmation of the cooperative conditions with Sharp before issuing a joint statement.
Institutional investors remarked that the end of August is the deadline for the publication of mid-year report by listed firms. Taiwan Stock Exchange hoped that Hon Hai can have clearer expression about the outcome of its renegotiation with Sharp and reappraise its paper gain/loss according to accounting criteria. On the other hand, in the face of the pressure of banking consortium, Sharp is in urgent need of the injection of fresh fund. Therefore, the joint statement between the two companies won't be postponed and is likely to be publicized next week.
Sharp's share price inched up one yen to close at 180 yen yesterday and fluctuated in the range between 170 yen and 200 yen in the recent two weeks. Institutional investors, therefore, estimated that the new investment price of Hon Hai should fall in the neighborhood of 200 yen.
Compared with the original price of 550 yen per share, Hon Hai can save 60% of investment fund. Previously, four companies under the auspices of Hon Hai notified in advance possible loss of NT$6.4 billion on paper in the second quarter, due to decline of Sharp's share price. Thanks to the price renegotiation, the paper loss will be limited.
In late March, Hon Hai announced agreement with Sharp for obtaining 9.9% stake in Sharp at 550 yen per share. Subsequently, Sharp's share price plunged to less than one third the original level. Early this month, Hon Hai issued a statement saying it has reached an agreement with Sharp to renegotiate the investment price.