Sharp and Foxconn are in the War of the Roses

WarRoses1989Foxconn and Sharp,  which are supposed to be tying the knot, are already feuding like the divorcing couple in the War of the Roses.

The pair have been eyeing each other up since Foxconn founder and billionaire Terry Gou pulled out of a planned capital tie-up and strategic partnership with Sharp in 2012.

But it got silly last week. Sharp’s board met and announced a decision to sell a two-thirds stake to the Taiwanese group which upset Gou.

On the eve of that board meeting, Foxconn had asked Sharp to delay voting on a deal as it had just received “new material information” from Sharp that it hadn’t seen before and needed to clarify.

However Sharp appears to have ignored Foxconn and agreed to the deal anyway. To make matters worse it then made the deal public.

The information Foxconn was worried about was $2.66 billion in contingent liabilities at Sharp. The list was pulled together by working level officials at Sharp and forwarded, without top officials seeing it, to Foxconn as a goodwill gesture to make the buyer aware of worst-case scenario risks.

Foxconn said it “felt violated” and Gou shouted at his team for not having discovered these liabilities in the first place.

The mood has calmed again after the two companies’ CEOs met in China to clear the air. They have now agreed to extend a deadline for the takeover talks by a week or two, reflecting the importance of a deal estimated to be worth nearly $6 billion.

The suspicion appears to be based on distrust from four years ago, when Foxconn agreed to take a stake in Sharp. Then, Sharp warned of losses, and Foxconn walked away. Sharp shares sank 74 percent over the next seven months.

Gou personally bought a stake in Sharp’s LCD TV panel plant in Osaka, and some at Sharp credit him with improving operations there. He then presented a takeover plan on January 30 which could save Sharp.

However there is still some doubts whether Hon Hai will really keep its promise and there are doubts if Taiwan can respect the Japanese way of doing business. After all the traditional way does seem to get rather a lot of debts in this case.