Shares of Sharp Corp. (SHCAY.PK) climbed around 14 percent on Japanese Stock Exchange on Wednesday after the electronic equipments and components provider announced about 10.4 billion Japanese yen or $111.47 million investment from South Korean conglomerate Samsung Electronics Co. Ltd. (SSNLF.PK) for a minority stake. The fund is raised to strengthen Sharp's liquid crystal display or LCD business.
Sharp said it has decided to issue new shares equivalent to 3.08 percent of the voting rights to Samsung's Japanese unit, Samsung Electronics Japan Co. Ltd., through a third-party allotment.
Of the total proceeds from the sale, Sharp will use 6.9 billion yen from April 2013 to March 2015 for introducing new technology for LCDs with high-definition features, and 3.23 billion yen for investment including rationalization of manufacturing facilities for LCDs used in mobile devices.
Sharp, which has been currently supplying Samsung with LCD panels, will form a capital alliance with the South Korean firm, under which it will continuously provide a long-term, stable and timely supply of LCD panels for large-size TVs and small- and medium-size LCD panels for mobile devices such as notebook computers.
Sharp expects the capital alliance to enable secure source of revenue from its core LCD business and to position its business for growth by continuously accelerating implementation of its business restructuring to realize a "recovery of business performance and credibility."
Sharp said the purpose of this agreement is to build up mutual trust relationship towards increase in the corporate value of both companies in the field of LCD business and to increase Sharp's capital adequacy.
As per reports, the share sale is part of Sharp's disclosed strategy for increasing capital through third-party investment in its medium-term by March 31, when its 2012 fiscal year ends.
The investment in Sharp will give Samsung further access to display panels for mobile devices such as smartphones and tablets.
Meanwhile, Sharp is a major supplier of mobile display screens to Apple Inc. (AAPL), which is Samsung's largest rival in the smartphone market.
Apple in mid-January reportedly slashed its orders for LCD panels for the iPhone 5 and iPad for the 2013 first quarter by nearly 50 percent, owing to weak demand.
In Japan, Sharp shares closed today's trading at 341 yen, up 42 yen or 14.05 percent, on a volume of 227.44 million shares, against an average volume of 41.14 million shares.
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by RTT Staff Writer
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