Foxconn and Sharp deal already in trouble

sharp2Hours after it was announced, Foxconn’s plans to buy Sharp are already in trouble.

Sharp CEO Kozo Takahashi and Foxconn Chief Executive Terry Gou plan to meet today after the world’s largest contract maker of electronic goods put its takeover of the loss-making Japanese firm on hold.

Apparently the problem was previously undisclosed liabilities which Foxconn discovered when the deal went through. Foxconn said it would not sign the deal until it had clarified some “new material information” from Sharp. It did not elaborate.

One of the sources said Foxconn’s own due diligence had uncovered liabilities

A spokesman for Foxconn declined to comment on the issue. Sharp also declined to comment.

But the entire deal is in trouble according to analysts.

Shares in Sharp slid 15 percent this morning, adding to losses a day earlier as planned share dilution under the deal looked larger than expected. The stock has fallen 27 percent over the past two days.

The last minute hitch casts doubt on a deal that would have marked the conclusion to five years of courting by Gou and the opening up of Japan’s insular tech sector to foreign investment.