Sharp Electronics Rallies 8% this Morning

In Asian trade this morning, Japanese electronics giant, Sharp Corp. rallied eight percent as reports that Taiwan’s Hon Hai Precision Industry, better known as Foxconn Technology, would buy Sharp for ¥300 billion after months of speculation concerning this deal.

There are, as always, strings attached to this deal. Hon Hai, which is the world’s largest contractor of electronics, is demanding a complete restructure of Sharp’s management team. This includes the immediate resignation of President Kozo Takahashi after the deal closes.

After announcing the deal, shares of Hon Hai were down three percent.

Neither company has yet to confirm this deal but ¥300 billion would represent a fifty percent total position of Sharp’s overall market cap. Hon Hai would also take on the massive debt of ¥760 billion Sharp is currently saddled with. Investors have been expecting this news since the chairman of Hon Hai, Terry Gou, has repeatedly expressed interest to invest money into Sharp.

In 2012 Sharp considered selling a 9.9 percent stake in the company but the deal fell through. Gou still expressed hopes on a future deal. This current deal would bolster Sharp’s current restructuring and effort to raise funds after being bailed out by local Japanese banks last May. This was the second bailout in three years of the ailing electronics company.

The Sharp Corporation was one Japan’s industry leader of consumer electronic. However, stiffening competition from China put a big dent into its liquid crystal display (LCD) unit. The firm, based in Osaka, Japan has faced annual losses for seven straight financial years. They also lost money, this current year which ended in March. Operating profit for 2015 is expected to come in at ¥10 billion. This is well below the expected ¥80 billion.

Shares of Sharp have underperformed all year, which is not at all surprising.