Bloomberg News

Hon Hai Climbs on Renegotiation Over Sharp Stake Price

August 05, 2012

Hon Hai Jumps on Renegotiation of Sharp Investment

Foxconn still plans to proceed with an investment of at least 9.9 percent in Sharp, while the deal won’t be for the original price of 550 yen per share, Hon Hai spokesman Simon Hsing told Bloomberg News Aug. 3. Photographer: Tomohiro Ohsumi/Bloomberg

Hon Hai Precision Industry Co. (2317), maker of iPads for Apple Inc., climbed the most in almost four years in Taipei trading after saying it will renegotiate the price of its planned stake in Sharp Corp. (6753)

Hon Hai, flagship of the Foxconn Technology Group, jumped as much as 7 percent to NT$87.30, headed for the biggest increase since September 2008. Foxconn Technology Co., an affiliate that also plans to invest in Sharp, jumped by the daily 7 percent limit to NT$107, while the benchmark Taiex index rose as much as 1.7 percent.

Foxconn Technology Group companies wrote off NT$6.4 billion last quarter because of a decline in Sharp’s share price as investors bet against the Japanese electronics maker’s chances of a turnaround. Foxconn still plans to proceed with an investment of at least 9.9 percent in Sharp, while the deal won’t be for the original price of 550 yen per share, Hon Hai spokesman Simon Hsing told Bloomberg News Aug. 3.

Hon Hai, the world’s largest contract manufacturer of electronics, lost 3.8 percent and Foxconn Technology Co. fell by its daily limit as Sharp’s stock dropped 28 percent on Aug. 3 in Tokyo after widening its full-year loss forecast eight-fold. Sharp closed at 192 yen that day, 65 percent below the price it agreed to sell shares. The renegotiation was announced after both markets closed.

“If Hon Hai Precision manages to renegotiate the purchase price to the latest Sharp trading price, we will see our Q2 EPS estimates improve 35 percent, and 2012 EPS improve 5 percent from our base case,” Alberto Moel, who rates the stock outperform at Sanford C. Bernstein in Hong Kong, wrote on Aug. 3. Hon Hai’s loss on the deal this quarter could have been around NT$7.2 billion, he wrote.

Foxconn still plans to proceed with the investment “at the most appropriate time and most appropriate price” with the deal to close by the end of March, chairman Terry Gou said yesterday.

Hon Hai traded at NT$86.60 as of 10:34 a.m. in Taipei trading while Foxconn Technology Co. (2354) traded at NT$106.50.

To contact the reporter on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net


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