Samsung Electronics Co is set to invest $110 million in Sharp Corp,
ensuring it a stable supply of TV panels and bolstering the survival
chances of the Japanese maker of Apple Inc iPhone and iPad screens.
Shares in Sharp jumped as much as 19 percent in early trade on the news.
investment would give Samsung a 3 percent stake in the Japanese LCD
pioneer, three sources familiar with matter told Reuters, making it a
leading foreign shareholder alongside chipmaker Qualcomm Inc, which in
December agreed to invest as much as $120 million.
the amount of investment, it is the partnership with Samsung that Sharp
gains that is important. Sharp has an opportunity to use the Samsung
platform," said Tetsuro Ii, chief executive officer of Commons AM, a
Tokyo based investment fund.
A deal would come as Sharp, which
received a $4.4 billion bailout from its banks in October, tries to
boost LCD plant utilisation, particularly at its Kameyama factory in
It has had to slash production of Apple iPad
screens at the facility since the start of the year, other sources told
Reuters in January, as consumer demand shifts to the iPad mini, for
which Sharp is not a supplier.
An agreement would also be a rare
cross border deal between the two rival countries and the first time the
South Korean TV maker has ever taken a leading stake in a Japanese
rival. Japan's big three TV set makers, Sharp, Sony Corp and Panasonic
Corp are struggling to overcome losses as Samsung clobbers them in
"We see a possibility that Samsung in return for
its investment, may demand more preferential pricing in parts
supplies," Deutsche Securities analyst Yasuo Nakane said in a report. A
deal would also provide an opportunity for Samsung to partner with or
even acquire Sharp's solar panel business, Nakane added.
already supplies LCD panels for Samsung's 32 inch, 40 inch and 60 inch
TVs, said Nakane. Samsung also buys screens from Taiwanese makers.
Sharp spokesman in Tokyo did not confirm or deny the Samsung investment
plan. "This news is not something that has been announced by the
company," he said. Samsung also declined to comment.
Japanese media said an announcement would come later in the day.
modest, cash from Samsung would also provide Sharp with much needed
funding as a previous agreement for Hon Hai Precision Industry Co Ltd to
buy a stake unravels amid reluctance by Sharp to cede any management
control to the Taiwanese company.
Separate sources told last month
Reuters the Japanese firm's bank-backed revival plan was unlikely to
include a capital infusion from the Hon Hai, which last year bought a
one third stake in Sharp's LCD plant in Sakai, western Japan, the
world's only 10th generation display factory.
To secure the $4.4
billion in loans from banks including Mizuho Financial Group and
Mitsubishi Financial Group, Sharp had to agree to trim its workforce by
10,000 and mortgage its offices and factories in Japan, limiting its
ability to sell assets to overseas facilities.
Sharp, which in
November said it may not be able to survive on its own, may sell its
Chinese TV assembly plant to Lenovo Group and is in talks to sell its
Mexico factory to Hon Hai, according to sources.
also faces high borrowing costs in credit markets, encouraging it
instead to seek investment from the Samsung and Qualcomm. Standard &
Poor's rates Sharp's debt as B+, a highly speculative grade while Fitch
has Sharp lower at B-. Moody's withdrew its rating on Sharp in April.
aims, through its Pixtronix subsidiary, to work with Sharp to develop
new power-saving screens based on Japanese company's IGZO technology.
made an initial investment of half the promised amount at the end of
the year in a private placement of stock, giving the U.S. company a 2.64
percent stake after dilution. Payment of the remainder is conditional
on Sharp returning to profit in the six months ending March 31.
© Thomson Reuters 2013