Apple Inc. (NASDAQ:AAPL) iPhone Manufacturer Foxconn has agreed to an acquisition deal with Sharp in a deal valued at $3.5 billion.
Sharp is the firm that makes displays for iPhone and thus Foxconn’s vested interest in taking ownership of the display maker. The two firms came to an agreement on Wednesday after a long dispute about undisclosed liabilities in the acquisition that lasted for a month. The disagreements gave rise to more doubts as to whether the two firms would handle the heavy competition arising from other smartphone display makers.
The acquisition deal between Foxconn and Sharp was sealed at a discounted amount because the initial value was more than $4 billion, thus discounted by roughly $900 million. Foxconn will part with $3.5 billion to receive two-thirds of Sharp’s shares. The acquisition of Sharp is the largest acquisition of a Japanese firm by a foreign company. It also marks the end of Sharp’s independence which spanned a whole century since the company was formed.
Nevertheless, it is a positive step for both companies, particularly for Foxconn because the iPhone maker will gain access to the display maker’s advanced screen technology. This will strengthen Foxconn’s pricing point with Apple. Sharp has a few patents that relate to display technologies, and the acquisition will give the iPhone maker access to the firm. Sharp will also use the opportunity to amend its financial situation. The company reported an operating loss of $1.5 billion in its latest financial year.
During Wednesday’s close, Foxconn reported that it would acquire Sharp’s stake at 88 yen a share with a discount of 35%. Sharp also makes other products such as TVs, calculators and a few other products and though the brand has a large following in Japan, the same cannot be said for its performance in the international market. Foxconn chairman Terry Gou stated that the deal between the two firms will lead to the unlocking of Sharp’s full potential. Sharp will leverage the acquisition to enhance its capacity for display production.