Qualcomm may become Sharp’s biggest shareholder

Qualcomm Inc may become Sharp Corp’s biggest shareholder, a move that would give the struggling Japanese TV maker the backing of a big chipmaker and help reassure investors about its viability, two sources familiar with matter said.

The two technology firms are in talks for Qualcomm to invest as much as 10 billion yen ($121.5 million) in Sharp, and to jointly develop a new generation of power-saving IGZO displays, the sources said on the condition they were not identified.

At yesterday’s closing price that would give Qualcomm a 5 percent stake after dilution. Sharp’s stock, which has lost three quarters of its value since the start of the year, rose as much as 2.9 percent on Tuesday after the Nikkei business daily first reported the potential partnership.

Sharp declined to comment, while Qualcomm officials were not immediately available.

Sharp may announce the tie-up as early as Tuesday. Under its terms, Sharp could receive about 5 billion yen from Qualcomm through a private placement of new shares by the end of the year, with the remaining investment to come after panel production starts.

Sharp had been expected to make Hon Hai Precision Industry Co Ltd its biggest shareholder adding to an earlier agreement to sell the Taiwanese company a stake in its advanced television LCD panel plant in Sakai, western Japan. That agreement, however, unraveled as losses and mounting debt threatened to put Sharp out of business, forcing it to seek a $4.4 billion bank bailout.

Talks with Hon Hai to renegotiate its investment have since stalled, but it may buy some of Sharp’s overseas TV assembly plants. The Sankei newspaper reported on Sunday that Hon Hai plans to purchase three factories in China, Malaysia and Mexico for $667 million.

The investment from Qualcomm would help Sharp boost its shareholder equity ratio, which at the end of September stood at 9.9 percent, half the 20 percent level usually considered the minimum for financial stability.

Last month, Sharp nearly doubled its forecast full-year net loss to 450 billion yen ($5.47 billion) after booking a $1.1 billion restructuring charge in July-September.

($1 = 82.2850 Japanese yen)

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Qualcomm may become Sharp’s biggest shareholder