Taiwan: Foxconn overpaying for Sharp stake

Taiwan's economic affairs ministry returns application by Hon Hai, also known by trading name Foxconn, to buy stake in Sharp, citing insufficient detail on investment efficiency of deal it considers "a little pricey".
Written by Jamie Yap, Contributor

Taiwan's Ministry of Economic Affairs has returned Hon Hai's application to buy a 10 percent stake in ailing Japanese electronics giant Sharp, saying insufficient information was given about the investment efficiency of the deal.

In a Reuters report Thursday, Emile Chang, deputy executive secretary of the ministry's investment commission, said: "We think Hon Hai has not explained enough about the investment efficiency of the deal, which is related to price...the deal is a little pricey."

The commission oversees all outgoing investment and Hon Hai Precision Industry--also known by its trading name Foxconn--needs its approval before it can invest in Sharp.

Earlier this week, Hon Hai Chairman Terry Gou said the company "still wants" to invest in Sharp even after it announced a major restructuring involving 5,000 job cuts and widened its loss forecast--which would lower the value of the proposed stake. It had agreed in March to buy a 10 percent stake in Sharp for over US$800 million and become Sharp's largest shareholder.

Taiwan's investment commission, which reviews all mergers and acquisitions involving foreign companies, has stopped deals in the past. Last year, it blocked a US$1.6 billion management buyout of electronics component company Yageo led by private equity firm Kohlberg Kravis Roberts (KKR), Reuters noted.

A separate report by Bloomberg BusinessWeek Thursday said Hon Hai plans to resubmit its application to the commission. "We will reflect on the regulator's concerns, re-evaluate and then resubmit after we've made a joint announcement with Sharp about the transaction," said Hon Hai spokesperson, Simon Hsing.

The ministry's Chang also added that returning Hon Hai's original application was not a rejection by the commission. "We asked them to provide more information on the expected returns on investment and other financial information," he said.

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