Foxconn's $6.2B acquisition of Sharp could be a win for Apple, but deal stumbles over Sharp's liabilities

Foxconn agreed to terms to take over Sharp, committing to pay roughly $6.2 billion in exchange for a 66 percent stake in the venerable Japanese electronics vendor. The offer is a 32 percent discount from Wednesday's closing price of Foxconn shares, Bloomberg reported, and the move marks a rare case of a foreign buyer picking up an iconic brand.

However, shortly after Sharp announced the deal, Foxconn issued a statement that it would delay the deal due to new information it had just obtained from Sharp. According to a handful of media reports, Foxconn discovered Sharp's roughly $3.1 billion in undisclosed liabilities, information that appears to have placed the deal into limbo.

If the transaction is ultimately successful, Foxconn's acquisition of Sharp could mark a big win for Foxconn's iPhone business.

Foxconn is known primarily as one of the main manufacturers of the iPhone, of course, although it makes iPads and several other devices for other major electronics manufacturers. Importantly, it also supplies some components for Apple's smartphone. Last fall, Foxconn signed a letter of intent to buy a stake in Sharp's liquid crystal display business -- the deal would have given Foxconn management control of Sharp's LCD unit, which produces some of the displays that go into the iPhone.

Foxconn doesn't make displays, as Quartz noted, which is far and away the most expensive single component in the iPhone. So the possible Sharp acquisition will enable Foxconn to add displays to its offerings, providing a way to increase sales revenues from Apple. That scenario would also enable Apple to buy yet another component from Foxconn -- a longtime partner -- rather than having to go to a smartphone competitor such as LG or Samsung for displays.

The acquisition may eventually enable Apple to spend less to manufacturer the iPhone even as Foxconn's manufacturing revenues from the device ramp up. But that may not result in cheaper iPhones in mature markets such as the U.S. and Western Europe, where users have few qualms about paying top dollar for Apple's products.

But it could enable Apple to lower the price of its handsets in emerging markets such as Brazil and India, where consumers are generally much more price-sensitive. And that could help it better compete in those massive burgeoning markets at a time when the U.S smartphone sales have flattened.

For more:
- see this Bloomberg report
- see this Quartz article

Related articles:
Reports: Foxconn bids $5B for Sharp in a move that could help Apple
Apple's iPhone and iPad struggles are real
Apple shares dip on reports of iPhone production slowdown


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