Deal confirmed: Samsung forks out $112 million for 3% share in Sharp

Sharp has confirmed that it has agreed to a much-speculated deal with Samsung that will see the mobile firm invest 10.4 billion yen (around $112 million) to buy a 3.08 percent stake in the company and gain greater access to its display technology.

“The purpose of this [deal] is to build up mutual trust relationship toward increase in the corporate value of Sharp and Samsung Electronics in the field of liquid crystal display business, and at the same time to enhance Sharp’s capital adequacy,” a statement announcing the deal reads.

Samsung is already a Sharp customer but this deal will see the alliance “further strengthened” with the Japanese tech firm committing to provide LCD panels for large TVs, as well as small- and medium-sized LCDs for mobile devices.

The deal is a significant one since it indicates a shift in power towards the smartphone space. As the New York Time’s Digits blog noted, Samsung could help Sharp reduce its dependency on Apple and increase the efficiency of its panel-making efforts.

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Sharp has seen its financial health decline severely over the past 18 months or so, and it was forced to lay-off 11,000 staff and mortgage key assets — including factories and offices. Last last year it was buoyed when it announced a $120 million investment deal from chip firm Qualcomm, and this is another validation of its business.

Another possible investor that is still to commit is Hon Hai, the parent company of Apple partner Foxconn. The two sides have been negotiating a deal that would see the Taiwanese manufacturer take a 10 percent share but, with the deadline to close the investment set for the end of March, Sharp is running out of time, and will hope that this helps bring the Hon Hai deal over the line.

The Samsung deal is slated to go through on March 28. Samsung is buying 35,804,000 shares at a price of 290 yen each (around $3.11).

Sharp surprised some analysts when it posted operating profit of 2.6 billion yen ($28.5 million) in its third quarter 2012 earnings, but the struggling electronics maker recorded a net loss of 36.7 billion yen ($398 million) for the period, showing it still has much redevelopment to do.

Sharp isn’t the only Japanese technology firm that is raising funds to rebuild. This year alone, Sony has sold office buildings in New York ($1.1 billion) and Tokyo ($1.2 billion), and cashed out investments in medical firm M2 and mobile games specialist DeNA ($467 million).