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Samsung to buy 3% stake in Japanese rival Sharp

Samsung Electronics has agreed a deal to buy a 3% stake in struggling Japanese electronics maker Sharp for 10.4bn yen ($110m; £75m).

Sharp has been trying to restructure its operations amid mounting losses.

However, it has found it tough to raise money after its credit rating was cut to “junk” status last year.

Analysts said the investment from Samsung, the world’s biggest TV maker, was likely to provide a boost to Sharp’s efforts to revive its business.

“For Sharp, this is good news from all fronts,” said Gerhard Fasol of Eurotechnology Japan in Tokyo.

“Not only can Samsung help Sharp smooth its production and operations, it can also become a key customer of Sharp’s products, especially flat screens,” he added.

His views were backed by a statement from the South Korean firm which said that the deal would help to “lay a firm foundation for Samsung to secure a steady supply of liquid crystal display (LCD) panels from diversified sources”.

Earlier in the day, shares in Sharp had jumped following reports that such a deal was set to be announced.

Its shares rose as much as 17% to 350 yen on the Tokyo Stock Exchange, before closing at 341 yen.

Difficult times

Sharp’s fortunes, like that of other Japanese electronics makers, have been hurt by a decline in global demand and falling prices of TVs.

It has forecast a loss of 450bn yen for the year to 31 March 2013.

The firm has announced a series of measures, including cutting 5,000 jobs or just under 10% of its workforce, in an attempt to cut costs.

It has also been looking for potential investors to help with its revival plan. However, some of those deals have been tough to negotiate.

Last year, Sharp agreed a deal to sell a stake of about 10% to Taiwan’s Hon Hai for $800m.

The deal was announced in March with the Taiwanese firm agreeing to pay Sharp 550 yen per share.

But Sharp’s shares fell as much as 70% in the subsequent months and the deal has yet to be concluded.

Though Sharp shares have recovered some of those losses, they are still trading well below the 550 yen mark and there are concerns that the deal may not happen at all.

There have also been reports that Hon Hai has asked for a seat on Sharp’s board of directors in exchange for the investment, something that the Japanese firm is not seen as too keen to accept.

Meanwhile, Samsung has stated that it will have “no involvement in Sharp’s business management in any way or form”.

Analysts said that the South Korean firm’s decision not to ask for a greater say in Sharp’s day-to-day operations had played a key role in securing this deal.

“Hon Hai tried to have a strong influence on the way in which Sharp is run, that was a major stumbling block,” said Mr Fasol of Eurotechnology Japan.

“Samsung has managed to avoid such a deal breaker.”

Late last year, there were also reports of chipmaker Intel being keen to invest as much as 40bn yen in Sharp.

Credit: BBC

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