Sharp clinches $2.1B rescue, promises cuts: source
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TOKYO - Japan's Sharp Corp clinched a $2.1 billion bailout deal from its banks in return for a promise to cut 5,000 jobs and split off its ailing smartphone display unit, a person familiar with the deal said on Thursday.
As part of its second major bailout in three years, Sharp's lenders, Mizuho Bank and Bank of Tokyo-Mitsubishi UFJ, agreed to inject a combined 200 billion yen ($2.1 billion) in a debt-for-equity swap, the source said, declining to be identified as he was not authorized to speak publicly on the matter.
Sharp CEO Kozo Takahashi, in a meeting earlier on Thursday, pledged to scale back its television operations and cut around 5,000 jobs, 10% of the workforce, the source said.
Sharp agreed to split off its LCD operations to improve transparency and accountability, although the unit would continue to be owned by Sharp for now, the source added.
Another source familiar with the deal said Sharp was also considering consolidating some of its manufacturing facilities and could sell its headquarters in Osaka.
Haggling over the extent of job cuts and restructuring had held up the talks, with Sharp initially reluctant to split off the LCD division, which accounts for 30% of its total sales, company and banking sources have previously said.
Analysts have said splitting off the division could pave the way for a deal such as a merger with rival Japan Display Inc -- a possibility which Sharp has denied considering.
While relief that a deal with lenders was in its final stages boosted Sharp's shares 4.5% to their highest level since December, some investors said the plans may not enough to turn the company around.
"The restructuring is likely to stop the bleeding in terms of losses and cash flow, but it's not going to resolve the basic problems," said Yasuo Sakuma, executive officer at Bayview Asset Management.
"It's difficult to assess positively since we're not seeing any strategy towards future growth."
Masayuki Otani, chief market analyst at Securities Japan, was also skeptical about its long-term prospects.
"It's hard to say whether the restructuring will be enough. It appears to have no choice but to rely on outside help until it can develop something that can be a new core business in place of LCDs, and that's going to take time," he said.
Sharp spokeswoman Miyuki Nakayama said the company was considering various options but nothing had been decided, adding that more will be disclosed in May when it releases a new business plan.
Representatives for the lenders declined to comment. Mizuho is a unit of Mizuho Financial Group Inc and Bank of Tokyo-Mitsubishi UFJ is part of Mitsubishi UFJ Financial Group Inc.
