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Asia300

Costly Sharp purchase plan sinks shares

HONG KONG -- Hon Hai Precision Industry fell Monday in Taiwan on concern that it will have to spend heavily should it acquire ailing Japanese electronics maker Sharp.

     Shares in the contract electronics manufacturer, also known as Foxconn, shed 2.48% to close at 74.70 New Taiwan dollars ($2.26), continuing a slide from before the break. The Taiwan market had been closed since Feb. 4 for the Lunar New Year holiday.

     News broke Feb. 4 that Sharp would prioritize Hon Hai in its continuing negotiations on a rescue plan. Investors are concerned about the burden the acquisition would put on Hon Hai's finances. 

     Hon Hai's offer involves 700 billion yen ($6.12 billion) in investments, a figure some in the Taiwanese market have called excessive. The China Times reported worries that while the acquisition would yield medium- to long-term benefits, it would deal a blow to earnings in 2016 and 2017. Chairman Terry Gou could even be forced to put some of his own money into the purchase, others fear.

     Some foreign-affiliated securities firms are reportedly moving to cut their investment recommendations for Hon Hai. Others remain more upbeat amid news that the company is sounding out SoftBank Group to join the takeover effort, reported by The Nikkei on Saturday.

     The public-private Innovation Network Corp. of Japan also remains in the running to buy the electronics maker with what is apparently a newly sweetened bid.

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