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Talk of the Day -- Hon Hai head asks for management role in Sharp

2012/09/04 18:52:23

Hon Hai Precision Industry Co. Chairman Terry Gou said he would like to have a management role in Sharp Corp., adding more twists to the ongoing talks between the two companies.

Gou was quoted in an exclusive interview with the Chinese-language United Evening News on Monday as saying that Hon Hai's investment in Sharp will not just be a capital investment.

"If it is just a capital investment, why would I need it," he said.

"I am not a venture capitalist. If it's just a capital investment, Sharp might as well talk to banks or investment companies, it won't need Hon Hai," he added.

Gou said a tie-up between the two companies will make "one plus one greater than two." But for that to come true, Hon Hai needs to have true influence within Sharp, meaning it needs a management role, he said in the interview.

Gou also said it is time for the century-old company to let Japan's younger generation take charge of management.

Hon Hai Precision Industry Co., also known as Foxconn, announced in March it agreed to buy a 9.9 percent stake in the Japanese company for 550 yen per share for a total of 67 billion yen.

Since the deal was struck in March, however, shares of Sharp have tumbled about 70 percent and temporarily hit the year's low at 164 yen per share on Aug. 15, prompting Hon Hai, which assembles Apple's iPhones and iPads, to ask for a renegotiation on the deal.

Gou was in Japan in late August to clinch the alliance, but he abruptly canceled his scheduled meeting with Sharp President Takashi Okuda Aug. 30 and instead returned to Taipei that day, according to the Japanese newspaper Sankei Shimbun.

The daily reported Monday that Okuda will visit Taipei to finalize the deal within this week. It did not disclose its source.

The following are excerpts from local media coverage of the latest development on the Hon Hai-Sharp talks:

Commercial Times:

Gou declined to disclose when Okuda would visit Taipei, saying it is a secret.

According to sources in Hon Hai, if Sharp agrees to let Hon Hai gain a management role in the company, the Taipei-based company will agree to retain the agreement it struck with Sharp in March, which is to buy Sharp's 9.9 percent stake for as high as 550 yen per share.

Gou said he hopes Sharp can understand that he does not plan to live in Japan to manage Sharp. He also said the century-old company should let itself be run by Japan's younger more innovative generation.

Tetsuo Onishi, Sharp's chief financial officer, was quoted by Sankei Shimbun as saying Aug. 31 that Hon Hai appears to want the renegotiation deal to include further cooperation on small LCD panels, smartphones and TV displays.

Sharp, in an attempt to receive more loans, has handed over a 9.2 percent stake in car navigation maker Pioneer Corp. to Japan's Mitsubishi UFJ Financial Group and Mizuho Financial Group to secure fresh financing, according to the company's regulatory filing.

Sharp's shares dived 6.1 percent to close at 186 Japanese yen (US$2.4) Monday on uncertainty over the Hon Hai-Sharp deal and due to Standard & Poor's downgrade of Sharp to "junk" status on Aug. 31. (Sept. 4, 2012).

United Daily News:

Japanese media reported Monday Japanese banks had asked Sharp to reach a consensus with Hon Hai on the deal before they will agree to refinance Sharp for as much as 360 billion yen in short-term commercial paper loans that are due by the end of September this year.

Okuda was therefore pressured to visit Taipei to finalize the deal with Gou, reported foreign media.

Sharp had also proposed to transfer its TV assembly plants in Nanjing, China and Mexico to Hon Hai to make up for the latter's investment losses in Sharp.

But Hon Hai was not interested in the two plants, and was instead keen on expanding its cooperation with Sharp, reported Japanese media.

Meanwhile, Nihon Keizai Shimbuns reported Tuesday that Sharp should abandon its Japanese-style approach in running the ailing company.

It said Japan's bottom-up approach in running the business is in sharp contrast with the undemocratic but more efficient way of top-down approach as taken by Taiwan's Hon Hai and South Korea's Samsung Electronics Co.

It urged Sharp to be bold in the handling of its consumer electronics business or it will not be able to cooperate with competitive companies. (Sept. 4, 2012).

(By Ann Chen)