Sharp Corp. (6753), Japan’s largest maker of liquid-crystal displays, rose the most in more than two months in Tokyo trading after Kyodo News said the company is in final talks to sell a stake to Intel (INTC:US) Corp.
The shares jumped as much as 11 percent to 168 yen, headed for the biggest gain since Sept. 4, and traded at 163 yen as of 9:56 a.m. It was the largest percentage increase in Japan’s benchmark Nikkei 225 Stock Average (NKY), which added 0.1 percent. Sharp is in final talks with Intel to get an investment of 30 billion yen ($377 million) to 40 billion yen, which would make the world’s biggest chipmaker its top shareholder, Kyodo reported late yesterday, without citing anyone.
A capital alliance with a prominent U.S. company may help Sharp’s renegotiation with Foxconn Technology Group over a share sale, Kyodo said. Sharp has been unable to close a proposed deal with Foxconn, after initially agreeing to sell a 9.9 percent stake to the Taipei-based company in March, as the Japanese electronics maker’s shares have plunged 76 percent this year amid widening loss forecasts.
“The report is easing some concerns about Sharp,” said Mitsuo Shimizu, a Tokyo-based analyst at Iwai Cosmo Holdings Inc. (8707) “Still, the rally will be short-lived, as the amount of money isn’t enough to solve Sharp’s problems.”
Sharp isn’t the source of information for the report, and nothing has been decided, the Osaka-based company said in a statement today. Chuck Malloy, a spokesman for Santa Clara, California-based Intel, declined to comment.
The Japanese company may also get an investment from Qualcomm Inc. (QCOM:US), Kyodo said.
Sharp agreed in March to sell a 9.9 percent stake through new shares to Foxconn, the assembler of Apple Inc. iPhones founded by billionaire Terry Gou, for 550 yen apiece, for a total investment of 67 billion yen. An earnings forecast revision by Sharp in August caused its share price to plunge, prompting a renegotiation.
Sharp assumes a deal with Foxconn can be reached, President Takashi Okuda said earlier this month.
The Japanese company revised its earnings forecast again Nov. 1 and now estimates a record 450 billion-yen loss for the fiscal year ending March 31 amid falling demand and prices for LCD panels, a strong yen and competition from Samsung Electronics Co. (005930)
Sharp’s equity-capital ratio was 10.3 percent as of Sept. 30, less than a third of what it was a year earlier. Interest- bearing debts swelled to a record 1.2 trillion yen as of Sept. 30, the company said in a Nov. 1 statement.
Sharp hemorrhaged 103 billion yen in cash from operations in the first half of the year and said Nov. 1 there was “material doubt” about its ability to stay in business.
The 100-year-old electronics maker is promoting a turnaround plan that includes seeking 2,000 voluntary retirements, cutting salaries, selling assets and reducing capital investments, it said Nov. 1. The company is considering several partnerships as talks with Foxconn continue, President Okuda has said.
Sharp sought support from banks to help refinance its commercial papers after its credit rating was cut, and the company secured 360 billion yen in loans in September from Mizuho Financial Group Inc. (8411) and Mitsubishi UFJ Financial Group Inc., its two main banks.
Sharp pledged as collateral a total of 741 billion yen in assets as of Sept. 30, up from 19 billion yen six months earlier, according to its quarterly report. Assets under collateral included 259 billion yen of properties, 201 billion yen of inventory and 44 billion yen of machine equipment, according to the report.
In July, Sharp sold a stake in an LCD factory in central Japan to Foxconn founder Terry Gou , who will jointly run the 10th-generation facility, the most advanced in the industry.
Fitch Ratings cited Sharp’s growing liquidity risks in cutting the company’s credit rating Nov. 2 by six levels to B-, a junk rating defined as “highly speculative.”
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