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July 24, 2017

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Deal reached with Sharp to renegotiate stake price: Hon Hai

Hon Hai Precision Industry said yesterday that it has reached an agreement with Sharp to renegotiate the price for a deal to take a stake in the struggling Japanese electronics firm.

Hon Hai said it will still take the same amount of Sharp shares as agreed between the two sides in March, but it will also hold talks to revise the purchasing price.

Hon Hai, the electronics manufacturing giant which makes devices for Apple, made the revelation after shares of the Japanese firm plummeted to their lowest level in nearly four decades.

In March, Hon Hai and its affiliate companies agreed to take a 10-percent stake in Sharp for 550 yen (US$7) per share.

But Sharp's shares slumped 28 percent to 192 yen on the Tokyo Stock Exchange yesterday after the company reported huge losses for the April-June period, and forecast a net loss of 250 billion yen for this fiscal year, plus a massive job cut plan.

"Due to the volatility of Sharp's share price, Sharp has agreed that (Hon Hai) won't have to buy its stake based on the investment agreement signed on March 27, but Sharp still allows (Hon Hai) to take the same percentage stake," the Taiwanese giant said in the statement.

A Hon Hai spokesman said the company does not have a timetable for talks with Sharp to renegotiate the deal's terms.

Earlier, Hon Hai shares plunged on news of Sharp's financial woes.

Hon Hai share prices had dropped as much as 6 percent in mid-session before closing at NT$81.6, down 3 percent.

Sharp's woes sent investors speculating that Hon Hai would have to write down its investments in Sharp and affect its earnings for the second quarter or even for the rest of the year, dealers said.

"Many investors took cues from the dive of Sharp's shares in Tokyo after it announced a workforce reduction plan amid massive financial losses," Grand Cathay Securities analyst Mars Hsu cited the Central News Agency as saying.

"The market is deeply concerned that the recent heavy share price losses suffered by Sharp will force Hon Hai to write down its investments in the Japanese firm," Hsu said before Hon Hai's announcement.

"Sharp's worsening bottom line is likely to trigger more selling of its shares. Investors in Taiwan are afraid that Hon Hai will have to make more provisions to cover its investment losses," Hsu added.

Other Taiwan-based companies affiliated with Hon Hai, such as LCD panel maker Chimei Innolux, also saw their shares dive.

Dealers estimated that the market value of the companies in the Hon Hai group shrank NT$47.2 billion in one day.

Hon Hai's consolidated earnings per share for the first quarter came to NT$1.40.

In March, Hon Hai and three of its affiliates — Foxconn Technology Co., Foxconn (Far East), and Q-Run Holdings — made a major move by agreeing to invest about US$800 million in Sharp.

Hon Hai Chairman Terry Gou also agreed to acquire — under his own name — half of Sharp's 93 percent interest in an advanced LCD panel plant in Japan for an additional US$800 million.

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