The two companies had initially announced an agreement that would have seen Foxconn take ownership of two-thirds of the company with $4.4 billion of new shares, although Sharp would continue to operate independently. This would have been followed by a further $1.4 billion worth of investments. However, Foxconn now says that it has received some new information from Sharp that it needs to clarify before going ahead with the deal.
According to the Wall Street Journal, the new information is a list comprising 350 billion yen ($3.1 billion) of contingent liabilities at Sharp. This news casts serious doubts over the future of the arrangement, which could well be scrapped. The company’s shares had already fallen some 14 percent after details about the deal were confirmed.
“After receiving new material information from Sharp yesterday morning, we have accordingly informed Sharp last night that we will have to postpone any signing of a definitive agreement until we have arrived at a satisfactory understanding and resolution of the situation.” – Foxconn
Foxconn entered the picture just last month, offering up a $5.8 billion sum for the struggling manufacturer. Interestingly, Foxconn builds Apple’s iPhone and Sharp had been making LCD displays for the handsets, so there’s likely an interest for Foxconn in bringing production under a single roof.
The news of a deal has been widely expected, as Sharp is in some rather deep financial trouble. The company has long been struggling with high yearly losses and substantial levels of debt. Last year alone the display manufacturer noted a loss of $1.9 billion despite of massive cutbacks, and the company owes over $4.4 billion in debt to a variety of Japanese banks.
Sorting out this latest development could take some time, something that Sharp is quickly running out of.