Japanese Prime Minister Shinzo Abe came into office on a pledge of resuscitating the economy with market reforms and stimulus programs. Now his government’s commitment to shareholder rights faces scrutiny in the case of troubled electronics giant Sharp.
Although the Osaka-based company is a household name because of its TVs, it’s long operated in the red. For the year ending in March, analysts estimate a loss of 82 billion yen ($694 million). Sharp is in talks with two possible saviors: Taiwan’s Foxconn Technology Group and a government-backed fund called Innovation Network Corp. of Japan (INCJ). Foxconn is offering $5.1 billion; INCJ plans to bid $2.6 billion.
It sounds like a win for Foxconn. But in Japan, floundering companies have long relied on the state. Sharp’s management is leaning toward the lower offer, according to two people familiar with the talks. Shareholders haven’t griped publicly, and Sharp’s banks seem to be onboard.
Critics see Sharp as proof that Abe doesn’t have the stomach for tough reforms. After vowing to liberalize labor markets and deregulate parts of industry, he has delivered few substantive changes. The economy has contracted three times since he took office. “This is a test case for Abe, and he and his government will fail,” says Michael Cucek, a political science professor at Temple University’s Japan campus. Foxconn Chairman Terry Gou has met with Sharp’s major lenders as well as government officials to press his case, according to a person familiar with the talks. read more here