Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) has decided to invest 10.4 billion yen ($111.5 million) in Sharp Corporation (TYO:6753). to get the supply of large sized LCD panels. Samsung will acquire a 3 percent stake in Sharp after this agreement along with the supply of large LCD panels for televisions.
Through this third party Allotment Capital, the companies aim at increasing mutual trust relationship in the area of corporate value of Sharp Corporation (TYO:6753) and Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930), as well as also increasing Sharp’s capital adequacy. Sharp supplies LCD panels to Samsung and seeks to make the bond stronger to provide long term, continuous and in-time supply of LCD panels for large size TVs, and small and medium sized LCDs panels for mobile devices like notebook computers.
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Earlier, Sharp was also involved in talks with Hon Hai Precision Industry Co., Ltd. (TPE:2317) a Taiwan based company also known as Foxconn Technology Co., Ltd. (TPE:2354), for raising capital, but no deal was finalized. In December, Sharp made an announcement regarding an investment of 9.9 billion yen from QUALCOMM, Inc. (NASDAQ:QCOM) for developing new display technology.
Samsung will become the fifth largest Shareholder of Sharp Corporation (TYO:6753) along with becoming the largest foreign entity to acquire a stake in Sharp. Prior to this agreement of Samsung and Sharp, QUALCOMM, Inc. (NASDAQ:QCOM) was the largest shareholder by acquiring 2.64 percent share of the company.
Mobile major Apple Inc. (NASDAQ:AAPL) also seeks to get supply of LCD panels from Sharp, which indicates that the agreement between Sharp Corporation (TYO:6753) and Samsung could be an important one for Samsung considering the continous dispute between Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) and Apple Inc. (NASDAQ:AAPL). According to a recent report of the New York Times, this agreement could prove beneficial to the Sharp in a way that it will reduce the dependence of Sharp on Apple Inc. (NASDAQ:AAPL), which uses Sharp’s panel in its iPhones and iPads.
The LCD panel factories of Sharp are in Kameyama and Sakai in Japan, they produce small and medium sized panels for smartphones, as well as large panels for TVs.
Sharp has an estimated total loss of 450 billion yen ($5 billion) for its current fiscal and the display maker is putting in all efforts to cut costs and restructure its business. The main reason for the company running deep into losses is that it has invested in plants in Japan that produces panel and the price of these panels has come down overseas.
Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) has a strong cash balance and tremendous buying power overseas. In January, it acquired a 5 percent share in Japanese firm, Wacom Co., Ltd (TYO:6727).