April 6, 2016 7:00 pm JST

Sharp buy rests on three Foxconn execs' shoulders

DEBBY WU and SHUNSUKE TABETA, Nikkei staff writers

TOKYO -- After many twists and turns, Taiwan's Hon Hai Precision Industry, the world's largest contract electronics manufacturer also known as Foxconn, sealed a deal on April 2 to acquire struggling Japanese electronics maker Sharp.

     Terry Gou, Foxconn's chairman, was born in 1950. He founded business in 1974 and developed it into a world-class company. In extracting concessions from Sharp through clever negotiation, Gou appears to have lost none of his skills. The Taiwanese company eventually agreed to take a controlling stake of 66% in Sharp on a voting rights basis at a cost of 388.8 billion yen ($3.51 billion), about 100 billion yen less than initially planned.

     Two of Gou's close aides, Vice Chairman Tai Jeng-wu and Chief Financial Officer Huang Chiu-lien, played key roles in bringing about the marriage of the two tech companies. Tai speaks fluent Japanese and is known as Gou's right-hand man, while Huang, nicknamed "the mama of money," has held the keys to the company safe since it's inception.

     Among the other top Foxconn people supporting Gou are Huang Qing-yuan, a company director, and Takeo Nakagawa, a professor emeritus of the University of Tokyo and Foxconn's special adviser and chief technology officer.

Heart and mind

"Without Mr. Tai, Foxconn's acquisition of Sharp would not have succeeded," according to a person involved in the talks over Foxconn's bailout of Sharp. Gou was so eager to acquire Sharp that the bid for the Japanese company was dubbed Hong Xia Lian, ("Love for Sharp") in Taiwan.

     Some Foxconn execs were cautious about the purchase, wondering where the money would come from. But Tai stuck by his man. Tai studied accounting and Japanese at the Tatung Institute of Technology, which was founded by Tatung group, a big Taiwanese electronics manufacturer. After graduation, he joined Tatung and worked in Japan.

     Tai joined Foxconn in 1985. He won Gou's confidence after successfully carrying out a contract manufacturing project to make game machines and other products for Japan's Sony. He became Foxconn's vice chairman in 2005.

     Tai appeared at a press conference on April 2, along with Gou and Sharp President Kozo Takahashi. During the question-and-answer session, Tai could be seen conferring with Gou. Some observers speculate that Tai may become Sharp's representative director and chairman.

     In response to a question about how Foxconn's 100 billion yen down payment on Sharp would be used, Tai grabbed a microphone and said the money would go for investment. Tai also said he wanted Sharp to use part of the funds to buy back its 100-year-old headquarters building in Osaka.

Holder of the purse strings

As much influence as Tai has over Gou's thinking, Huang Chiu-lien is said to have even more. Huang is the aunt of Gou's late wife, Lin Shuru. According to Taiwanese media, Huang is one of founders of Foxconn, providing capital for Gou to set up the company.

     Huang is shy of the media and her background is murky. She became acquainted with Foxconn employee You Xiangfu and married him. You is in charge of a manufacturing subsidiary in China as well as Foxconn's production automation.

     As Foxconn's treasurer, Huang works overtime with Gou nearly every day. She also often travels with him on his private jet. She is also said to be involved in all the company's investments and to have a complete picture of the flow of funds at Foxconn, including Terry's personal assets.

     Huang is believed to have been cautious about acquiring Sharp. According to financial sources, she proposed a listed Foxconn subsidiaries and Gou's asset management company jointly purchase the Japanese electronics maker to reduce the financial strain on Foxconn itself. As a result, Hon Hai's investment is reduced to less than half of the total amount.

    The two sides began negotiations on reducing the Taiwanese companies' investment at the end of February after it emerged that Sharp was on the hook for more debt than previously thought. One banking source said Huang headed Foxconn's negotiating team. Apparently at her direction, Foxconn put off signing a final agreement, vetted Sharp's debts thoroughly and checked the company's inventory.

    Foxconn eventually won an agreement from Sharp to trim the size of its investment by about 100 billion yen to 388.8 billion yen from the 489 billion yen initially planned. Huang expressed satisfaction that Foxconn and Sharp signed a final agreement amicably, saying the size of the final investment was less important.

     Sharp will now shelter under Foxconn's wing, forming a new management team and coming up with new growth strategies for its operations, including the LCD, liquid crystal display, and consumer electronics businesses. Tai and Huang, as well as Gou himself, are expected to play a key part in efforts to help Sharp get back on its feet.

 

Asia300

Hon Hai Precision Industry Co., Ltd.

Taiwan

Market(Ticker): TAI(2317)
Sector:
Industry:
Electronic Technology
Computer Peripherals
Market cap(USD): 54,324.61M
Shares: 17,328.73M

Sharp Corp.

Japan

Market(Ticker): TKS(6753)
Sector:
Industry:
Consumer Durables
Electronics/Appliances
Market cap(USD): 20,361.56M
Shares: 611.95M

Sony Corp.

Japan

Market(Ticker): TKS(6758)
Sector:
Industry:
Consumer Durables
Electronics/Appliances
Market cap(USD): 56,225.71M
Shares: 1,264.68M

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