Japanese electronics major Sharp Corp has reportedly accepted the bid made by Taiwan's Foxconn to acquire it. The acquisition will strengthen Foxconn's position as the world's largest electronics contract manufacturer.
Foxconn will invest over $5.8 billion in liquid crystal display (LCD)-maker Sharp, sources told Reuters.
Board members of Sharp have unanimously agreed to the takeover bid by Foxconn, while rejecting the rescue offer made by state-backed Innovation Network Corp of Japan (INCJ). The move also marks the opening up of Japan's technology sector to overseas investment.
"Sharp has the technology to build out the components to compete with Samsung as an Apple-supplier, which means that with Sharp under its umbrella Foxconn can help Apple wean itself off Samsung," said Gavin Parry, managing director of Parry International Trading, a brokerage in Hong Kong.
"This gives Foxconn better pricing power with Apple," he added.
Foxconn founder Terry Gou has long been looking to acquire Sharp in a bid to increase the company's competitiveness over its Asian rivals.
Shares of both the companies rose sharply by 4 percent on the respective exchanges following the reports of a deal.
Following the takeover, Sharp is expected to get a much-needed funds infusion and access to Foxconn's large distribution network.
The deal is also expected to be favourable for iPhone-maker Apple Inc, as it gives more bargaining power for the company while buying components from multiple suppliers.
"Apple wouldn't like Sharp and Japan Display Inc (JDI) to join forces because keeping as many vendors as possible can give them greater leverage over price and other negotiable conditions," Atsushi Osanai, an associate professor at Waseda Business School, told The Wall Street Journal.
