Chinese group to get control of Japan Display after $2.1 billion bailout



A Taiwanese-Chinese group will take control of the Apple Inc Japan Display provider after injecting funds as part of a 232 billion yen ($ 2.1 billion) rescue plan for the manufacturer of problem display panels.

The rescue comes after previous bailouts financed with public funds did not help the company reduce its dependence on Apple, whose slowdown in iPhone sales has severely affected Japan Display.

The agreement will convert buyers into Japan Display's largest shareholders, with a 49.8 percent stake, replacing the Japanese INCJ fund backed by the government and effectively ending government efforts to keep the manufacturer of national screens remaining outside of foreign hands.

The buying group, which includes Taiwanese flat panel manufacturer TPK Holding and Chinese investment firm Harvest Group, will inject up to 80 billion yen into the Japan screen by buying shares and bonds.

The INCJ will also join the rescue by accepting a debt swap for preferred shares for a total of 75 billion yen and the extension of senior loans worth 77 billion yen. After the agreement, their share will fall to 12.7 percent from 25.3 percent.

The agreement could be subject to a national security review of the United States at a time when Washington is intensifying its control over Chinese investment in the United States.

Japan Display has a subsidiary in San Jose, a US company that could grant the Committee on Foreign Investment in the United States (CFIUS) jurisdiction over the agreement.

The screens may not necessarily be critical, export-controlled technologies, but some of the Japan Screen technologies, such as fingerprint sensors, may pose a national security problem, said Nancy Fischer and Matthew Rabinowitz, partner and senior badociate, respectively, at the Pillsbury law firm, based in the USA. UU .

Minoru Kikuoka, head of the finance division of Japan Display, told reporters at a briefing that the company's legal advisors said it would not be necessary to file the CFIUS. However, CFIUS retains the indefinite jurisdiction to request a presentation and review the transaction, even after it is closed.

The rescue comes as sales of new iPhone models, many of which use newer organic light emission (OLED) screens, have left the new Japan Display factory that makes LCD panels (LCD) ) work at half capacity.

Japan Display expects to post its fifth consecutive year of net losses in the year ending this month, as disappointing sales of Apple's iPhone XR, the only model with LCD screen, thwarted hopes for a change.

Apple's business accounted for more than half of Japan Display's revenues in the last four years.

Kikuoka said at the briefing, without naming Apple, that Japan Display still owes its client about 100 billion yen. The technology giant of the United States led the majority of the $ 1.5 billion construction costs for a new LCD factory three years ago.

"We talk to our client, including that problem (of payment) as well, before reaching the agreement," Kikuoka said.

According to the latest agreement, Japan Display and Harvest Tech, part of the buying group, plan to jointly produce OLED panels, used in high-end iPhones, Japan Display said.

Reuters reported earlier this month that Japan Display will start supplying OLED displays for the Apple Watch later this year.

Japan Display was formed in 2012 by combining the LCD businesses of Hitachi Ltd, Toshiba Corp and Sony Corp in a deal negotiated by the government.

It went public in March 2014 and was worth more than 400 billion yen at that time. Now it is worth 67 billion yen.

© (c) Copyright Thomson Reuters 2019.


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