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Foxconn Buys Sharp for $6.2B, Becomes Apple's Biggest Supplier

by Reuters / / Source: Reuters
The logo of Foxconn, the trading name of Hon Hai Precision Industry, is seen on top of the company's headquarters in Tucheng, New Taipei city

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Ailing electronics maker Sharp announced on Thursday that it had agreed to be taken over by Foxconn, marking the largest acquisition of a Japanese tech firm by a foreign company and bolstering Foxconn's position as Apple Inc's biggest supplier.

However, Foxconn later said it would delay the signing, as Sharp had included new terms that needed to be clarified.

Foxconn, known formally as Hon Hai Precision Industry Co Ltd , said that Sharp on Wednesday morning had "couriered over a new key document to the management of Hon Hai." Foxconn said it responded to Sharp on the same day that the content needed to be clarified before a deal could be signed.

It hopes to be able to clear up the matter as soon as possible, it said in a statement.

Foxconn will acquire two-thirds of Sharp, which would issue around $4.4 billion worth of new shares to Foxconn. Foxconn's total investment is set to be more than 650 billion yen ($5.8 billion) in the loss-making liquid crystal display maker, a source familiar with the matter said.

Sharp's stock tumbled 14 percent as the share dilution looked larger than expected, with traders noting that the deal included the issuance of a class of shares that would be convertible next year.

The agreement, which signals an opening up of Japan's insular technology sector to foreign investment, will see Sharp start mass-producing organic light-emitting diode (OLED) screens by 2018, around the time Apple is expected to adopt the next-generation displays for its iPhones.

The decision comes after five years of courting by Foxconn founder Terry Gou, who sees ownership of Sharp as a way to better compete with Asian rivals such as Samsung.

"Sharp has the technology to build out the components to compete with Samsung as an Apple supplier, which means that with Sharp under its umbrella Foxconn can help Apple wean itself off Samsung," said Gavin Parry, managing director of Parry International Trading, a brokerage in Hong Kong.

"This gives Foxconn better pricing power with Apple," he added.

Sharp's board voted unanimously to accept the offer over a rescue by a state-backed investment fund, sources said, declining to be identified as they were not authorized to speak on the matter. Foxconn declined to comment.

Foxconn shares ended 2.6 percent higher.

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