Sharp has agreed to a $6 billion (about RM25.3 billion) takeover offer from Foxconn; however, it appears that the Chinese company is having second thoughts about the deal. Foxconn announced that it would be delaying the signing of the agreement due to new information provided by Sharp; citing that it required more time to study the details.
It turns out that Foxconn was not aware of a list of 100 contingent liabilities that it would be taking on should it take control of Sharp. These liabilities could potentially total up to $3.1 billion (about RM13 billion), which is a significant number to say the least. Contingent liabilities are not exactly concrete, and represent costs that the buying company would have to deal with based on the outcome of outside factors like lawsuits and contracts.
Foxconn, which is mainly known as the main assembler of iPhones, worked hard to get the deal with Sharp. Japanese companies have been known to shun offers from foreign companies; instead preferring to keep ownership of national brands within the country. Should the deal go through, it would mark a major shift in the Japanese reputation for keeping out foreign ownership.
It is unknown what Foxconn will do after reviewing the additional information. At the moment, it is likely that the deal may fall through. That being said, the company claims to have a plan to turn Sharp’s ailing fortunes around – which may yet offset the daunting amount of liabilities it is about to take on.
[Source: Wall Street Journal]