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Apple supplier Japan Display agrees to $800m bailout

Investment fund Ichigo Asset could control majority of voting rights

JDI is holding parallel negotiations with a Japanese fund and an alliance of companies as it seek fresh financial backing.

TOKYO -- Money-losing Apple supplier Japan Display has agreed to up to a 90 billion yen ($828 million) infusion from the Ichigo Asset Management group, securing a financial lifeline after a rescue plan by a Taiwan-China consortium collapsed in September.

Under the basic agreement announced Thursday, Japan Display, or JDI, will procure 80 billion to 90 billion yen from Ichigo in exchange for common shares and convertible bonds. JDI expects to ink the deal in January, with the transaction taking place in February or March.

The panel maker has been struggling to find sponsors to turn around its troubled business. The bailout saga took a chaotic turn at the end of September when an 80 billion yen bailout put together by an alliance of Taiwanese and Chinese investors fell through. It is still uncertain whether the latest rescue plan will move forward accordingly.

"Ichigo Asset is proposing the investment on the assumption that it will hold  [JDI shares] for the long term, and I strongly feel that we would be able to receive support from them," JDI President Minoru Kikuoka told reporters Thursday.

"I was told by Ichigo that we should be the ones to turn around the business," he said, stressing the company will be able to maintain autonomy under a turnaround under Ichigo.

Ichigo could end up with a majority interest in JDI, depending on the size of the direct stake and the extent to which Ichigo exercises the right to convert the debt into common stock. Ichigo apparently wants to install CEO Scott Callon as JDI's chairman if a final deal is reached.

A big question facing JDI is whether it can create a core growth business, such as sensors, that can take over from displays. Doing so will require more investment in research and development.

Ichigo is believed to value JDI's technological capacity, so additional layoffs appear to be off the table. But the investment manager did not send a representative to JDI's news conference Thursday. Ichigo declined to comment to Nikkei.

Taiwanese and Chinese investors formed the consortium Suwa Investment Holdings for the bailout plan. But two Taiwanese investors withdrew in June, and China's Harvest Tech Investment Management walked away in late September, essentially sending the bailout plan back to square one.

JDI has continued to negotiate a package from Suwa, but discussions have stalled. "No concrete plans has been made," a source close to the talks said. The latest rescue plan by Ichigo Asset is thus positioned as an alternative should the Suwa plan fall through.

A pledge of support from Apple pushed Ichigo's move to back JDI, a source close to the talks said. If negotiations with Apple run into snags as well, the proposed assistance from Ichigo could be set back. No details have been revealed about the conditions attached to convertible bonds.

INCJ, JDI's state-backed top shareholder, will grant additional financial support if Ichigo invests in the target. INCJ said Thursday that it is prepared to extend the repayment period for the 40 billion yen in financing issued to JDI between August and September. The original term was one year. INCJ was established in September 2018 via a company split from the Innovation Network Corp. of Japan.

JDI also said Thursday that it has agreed to negotiate with a customer to secure a $200 million capital investment. The customer may make the infusion by purchasing equipment at JDI's Hakusan plant in Japan's Ishikawa Prefecture. Operations at the facility have been temporarily halted since July.

The unnamed client is believed to be Apple. It is considering contracting out operation of Hakusan equipment to a third party, according to a source.

"I hope to reach a conclusion on the plant by the end of the fiscal year," Kikuoka said.

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