Hon Hai plans to sell 1% Sharp stake for listing upgrade: report

Taipei--Taiwanese manufacturing giant Hon Hai Precision Industry Co. (??) is planning to dispose of a 1 percent stake in Japan-based Sharp Corp. in a bid to meet securities listing rules in the Japanese market to help Sharp's equity listing return to the first section of the Tokyo Stock Exchange (TSE), the Nihon Keizai Shimbun (Nikkei) reported Friday.

After completing an acquisition deal in mid-August 2016 for US$3.5 billion, Hon Hai, the world's largest contract electronics maker, currently owns a 66 percent stake in Sharp, making it the largest shareholder of the Japanese firm.

Last August, Sharp shares were downgraded to the second section of the TSE from the first section, the main sector of the exchange, after the company reported that its debts outnumbered its assets as of the end of March 2016.

Under the securities listing regulations on the TSE, a company that wants to list its shares on the first section, where major large firms are traded, should have no less than 35 percent of its shares circulated in the market. The report said that is why Hon Hai plans to cut its stake in Sharp by 1 percent to 65 percent.

The Nikkei report echoed the ambitions of Tai Cheng-wu (???), the new president of Sharp, who used to be the deputy of Hon Hai Chairman Terry Gou (???), to bring Sharp shares back to the first section of the TSE after the Taiwanese owner successfully helped the Japanese firm make a financial turnaround.

After coming under the control of Hon Hai, Sharp reported in February a profit of 4.2 billion Japanese yen (US$38.84) for the October-December period of 2016.

That was a big improvement from the 24.7 billion yen loss recorded in the same period of the previous year. It was the first quarterly profit posted by Sharp in two years. Sharp attributed the improved bottom line to swift decision-making by Hon Hai to focus on cost reductions.

After turning to a profit, Sharp even raised the forecast of its operating profit two times in February.

Other news media in Japan also reported that Tai had told other executives of Sharp that he was hoping the company's shares will return to the first section of the TSE at the end of 2017 or in spring of 2018. The reports said that Sharp has started preparatory work for the listing upgrade.

According to the Nikkei report, before completing the acquisition deal with Sharp, Hon Hai had promised not to unload any Sharp shares without the Japanese firm's consent in two years after the purchase.

But, to push up Sharp shares to the first section of the TSE, Hon Hai has no choice but to cut its stake by 1 percent so that the Taiwanese shareholder is expected to enter talks with the subsidiary for the stake disposal, the Nikkei said.

The century-old Sharp is the first major Japanese firm to have been taken under the corporate umbrella of a foreign company after it incurred heavy losses in its crystal liquid display operations at a time of escalating competition from Taiwan and South Korea.

Tai has vowed to help Sharp stage a sharp rebound financially in 2017 after Hon Hai took over the company.

Source: Focus Taiwan News Channel