Samsung to pay £73m for 3 per cent stake in Sharp

6 March 2013
By Edward Gent
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South Korean electronics giant Samsung has made a rare corss-border deal to buy a 3 per cent stake in Japanese firm Sharp

South Korean electronics giant Samsung has made a rare corss-border deal to buy a 3 per cent stake in Japanese firm Sharp

Samsung will invest 10.4 billion yen (£73m) in Sharp to secure a supply of large-size LCD panels.

The agreement gives the South Korean company a 3 per cent stake in the Japanese electronics firm and Samsung said in a statement that the investment will help strengthen Sharp's LCD panel business but that it will not be involved in Sharp's management.

The alliance is a boost for the troubled Sharp, which makes Apple’s iPhone and iPad screens, as it has been seeking to raise capital as part of turnaround plans and its shares jumped as much as 19 per cent in early trade on the news.

The maker of Igzo display panels and Aquos TVs has struggled to stay afloat as competition from South Korean and Chinese TV makers squeezes Japanese manufacturers and their ability to make the big capital investments needed in the hyper-competitive LCD industry.

"Rather than the amount of investment, it is the partnership with Samsung that Sharp gains that is important. Sharp has an opportunity to use the Samsung platform," said Tetsuro Ii, chief executive officer of Commons AM, a Tokyo-based investment fund.

Sharp has been in talks with Taiwan-based Hon Hai Precision Industry, also known as Foxconn, to raise capital but no deal has been reached, though it did announced a £70m investment from Qualcomm in December to jointly develop new display technology.

An agreement with Samsung would be a rare cross-border deal between the two rival countries and the first time the South Korean TV maker has ever taken a leading stake in a Japanese rival.

"We see a possibility that Samsung, in return for its investment, may demand more preferential pricing in parts supplies," Deutsche Securities analyst Yasuo Nakane said in a report. A deal would also provide an opportunity for Samsung to partner with or even acquire Sharp's solar panel business, Nakane added.

Sharp forecasts a record £3.2bn loss for its business year through to March and has struggled to cut costs and reshape its business, partly because it has invested in expensive plants in Japan that make panels for which prices have fallen sharply overseas.

The plants embody Sharp's prized technology, but they also make the company hostage to the yen's swings.

The agreement is the latest investment in Japanese firms by Samsung, which sits on a stockpile of cash and has strong overseas buying power because of the won's rise. In January, it acquired a 5 per cent stake in Wacom, a Japanese firm with digital pen technology.

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