The Economist – “Sharp elbows”


“….An all-Japanese deal for Sharp would be awkward for Shinzo Abe, the prime minister, given his flagship policy of seeking to revive the economy via reforms. One element of his programme is to attract more foreign investment. Mr Abe’s advisers may even have had a say in Sharp’s abrupt change in attitude to Foxconn.

Last year Mr Abe brought in a corporate-governance code that emphasises shareholder rights and the duty of outside board directors to promote them. Sharp’s external directors are said to have feared being sued by shareholders if they opted for the INCJ’s much lower bid. It was also difficult for Sharp’s two main banks, Mizuho Financial Group and Bank of Tokyo-Mitsubishi UFJ, to shun Foxconn’s offer to assume some of Sharp’s debts.

Losing Sharp to Foxconn would be a singular humiliation for the INCJ and METI. The INCJ had aimed to merge Sharp’s LCD-panel business with that of Japan Display, a firm whose creation it oversaw in 2012 and which is now Japan’s main maker of smartphone screens. Another scheme was to meld Sharp’s domestic-appliances business with those of other Japanese firms, including Toshiba, another troubled industrial group.

The INCJ’s leaders are incensed at, and baffled by, the way the Taiwanese firm inched ahead. They argue that their plan is far tougher on Sharp and its banks. (As well as relieving the banks of much of Sharp’s debts, Mr Gou has hinted that he will keep the firm’s management and says he will not fire employees under 40.) “The biggest difference between the two bids is that we are asking Sharp’s Japanese main banks to cancel some of the firm’s debts and take a loss on them, since they are responsible for the company’s difficulty,” says Tetsuya Hamabe, chief strategy officer of the INCJ. That argument should go down well with reformers, who criticise the banks for propping up failing firms, if not with the banks’ own shareholders.

The INCJ may fight to the last, but a deal with Foxconn would show that Japan is changing its attitude to outsiders….” 

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