Sharp Samsung UPDATE2

(Japan Economic Newswire Via Acquire Media NewsEdge) TOKYO, March 6 -- (Kyodo) _ (EDS: RECASTING 1ST GRAF, ADDING INFO) Struggling Japanese electronics maker Sharp Corp. said Wednesday it will accept 10.38 billion yen in investment from Samsung Electronics Co. this month and increase its supply of liquid crystal display panels to the South Korean electronics giant to rebuild its business.

The deal will give Samsung -- the maker of the Galaxy series of smartphones -- a roughly 3 percent stake in Sharp, and allow Sharp to expand its supply of liquid crystal display panels, including its advanced power-saving "Igzo" LCDs in addition to large-size panels for televisions.

It will be the first time for major Japanese and South Korean electronics makers to form a capital tie-up, though they compete in their TV and flat-panel operations.

Sharp will issue new shares through a third-party allocation on March 28 to Samsung's Japanese unit, the Osaka-based company said. Samsung will pay 290 yen per Sharp share to acquire 35.80 million shares. The issue price is around 3 percent lower than the closing price of 299 yen Tuesday, Sharp said.

The company plans to use the proceeds to introduce new technology to produce high-definition LCDs and streamline its manufacturing facilities for LCD-related devices such as tablet and notebook computers, it said.

The capital and business alliance comes as Sharp's capital tie-up negotiations with Taiwanese partner Hon Hai Precision Industry Co., also known as Foxconn, have been deadlocked since Sharp's stock price plunged last year.

Hit by sluggish TV and LCD panel business amid severe competition with rivals including Samsung, the company's equity to asset ratio dropped to 9.6 percent as of the end of December, compared to 29.1 percent in December 2011.

Sharp provides LCD panels for smartphones to U.S. tech giant Apple Inc., Samsung's archrival. The Japanese company has also been supplying Samsung with LCD panels for TVs.

The capital alliance will enable Samsung, increasingly facing harsh business conditions due to the won's appreciation, to expand its outsourcing of LCD panels and curb its own investments on LCDs, a product category subject to wild price fluctuation risks.

Sharp's stock closed Wednesday up 14.04 percent at 341 yen after some media reported the capital-tie up deal the previous day.

In December, Sharp reached an agreement with Qualcomm Inc. to receive up to 10 billion yen in investment from the U.S. telecommunications device maker and jointly develop next-generation energy-efficient display panels.

Sharp said the impact of the capital alliance on its earnings for the business year ending March will be limited. It is projecting its largest-ever group net loss of 450 billion yen for the full business year.

Among other business tie-ups between Japanese and South Korean companies, Sony Corp. and Samsung set up a joint venture in 2004 to manufacture LCD panels for TVs, but the Japanese electronics company has terminated the venture.

(c) 2013 Kyodo News International, Inc.

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