Apple supplier Japan Display secures $936M bailout from Ichigo
Japan Display has been given a much-needed bailout, agreeing on Friday to an investment of up to 100.8 billion yen ($926 million) from Ichigo Asset Management, funds that will help keep the beleaguered Apple supplier in operation.
Japan Display supplies some of the LCD panels used in the iPhone 11.
The bailout, which has been in discussions for some time, provides Ichigo with effective control over the display producer, with it becoming the highest shareholder holding more than 50% of shares. It takes the top spot from INCJ, a fund backed by the government of Japan.
Under the terms of the deal, Ichigo will provide 50.4 billion yen ($463 million) into Japan display by late March, in the form of a purchase of preferred shares, bringing its ownership to 44.26%, reports Reuters. A secondary offer is also possible at a later date, again valued at 50.4 billion yen, which would bring Ichigo's total holdings to over 70% once performed.
"I've spoken to Japan Display's clients and heard their confidence in its technologies," Ichigo CEO Scott Callon told the media, with the confidence reportedly the main reason behind Ichigo's decision to invest. As part of the investment, Callon will be joining Japan Display as its chairman.
While unnamed, the clients mentioned by Callon are likely to include Apple, as it is Japan Display's biggest customer and a source of 61% of its revenue from the last financial year. Apple itself has provided some assistance to the company, reportedly in the form of shorter payment terms as well as an alleged $200 million in financial support.
One day ahead of the agreement announcement, trading of Japan Display's shares was suspended by the Tokyo Stock Exchange following reports of the potential bailout.
Japan Display's precarious financial situation was largely caused through its dealings with Apple, in that Apple provided approximately $1.5 billion in backing to construct an LCD plant over four years ago. As part of the agreement, Japan Display would pay Apple back over time, as well as becoming an Apple supplier.
However, Apple's shift over to OLED resulted in a reduction in orders for LCD components from Japan Display, with it still owing in excess of $800 million. Japan Display has started to move over towards OLED panel production, but it is thought Apple may have to wait for up to two years before receiving its the first OLED screen shipment.
There has also been an issue regarding the company's bookkeeping accuracy, after it was revealed in November a former accounting executive was fired from Japan Display, for allegedly embezzling approximately 578 million yen ($5.3 million) from the firm between July 2014 and October 2018.
Japan Display supplies some of the LCD panels used in the iPhone 11.
The bailout, which has been in discussions for some time, provides Ichigo with effective control over the display producer, with it becoming the highest shareholder holding more than 50% of shares. It takes the top spot from INCJ, a fund backed by the government of Japan.
Under the terms of the deal, Ichigo will provide 50.4 billion yen ($463 million) into Japan display by late March, in the form of a purchase of preferred shares, bringing its ownership to 44.26%, reports Reuters. A secondary offer is also possible at a later date, again valued at 50.4 billion yen, which would bring Ichigo's total holdings to over 70% once performed.
"I've spoken to Japan Display's clients and heard their confidence in its technologies," Ichigo CEO Scott Callon told the media, with the confidence reportedly the main reason behind Ichigo's decision to invest. As part of the investment, Callon will be joining Japan Display as its chairman.
While unnamed, the clients mentioned by Callon are likely to include Apple, as it is Japan Display's biggest customer and a source of 61% of its revenue from the last financial year. Apple itself has provided some assistance to the company, reportedly in the form of shorter payment terms as well as an alleged $200 million in financial support.
One day ahead of the agreement announcement, trading of Japan Display's shares was suspended by the Tokyo Stock Exchange following reports of the potential bailout.
Japan Display's precarious financial situation was largely caused through its dealings with Apple, in that Apple provided approximately $1.5 billion in backing to construct an LCD plant over four years ago. As part of the agreement, Japan Display would pay Apple back over time, as well as becoming an Apple supplier.
However, Apple's shift over to OLED resulted in a reduction in orders for LCD components from Japan Display, with it still owing in excess of $800 million. Japan Display has started to move over towards OLED panel production, but it is thought Apple may have to wait for up to two years before receiving its the first OLED screen shipment.
There has also been an issue regarding the company's bookkeeping accuracy, after it was revealed in November a former accounting executive was fired from Japan Display, for allegedly embezzling approximately 578 million yen ($5.3 million) from the firm between July 2014 and October 2018.
Comments
I’m not an expert on bankruptcies, but loans (creditors) and those with preferred shares get paid back first. Regular shareholders get nothing...
Bottom line, don’t invest in individual companies... or be very aware of the risks.
See, MS purchased a nominal amount of special shares (US$150m, if memory serves) and publicly promised to keep developing MS Office for the Mac for five years. This public affirmation of expecting Apple to survive is what Jobs was after - he knew he just needed time. The money was nice and all, but it wasn't the key part of the deal.
What Jobs gave up was the chance to get paid by MS for the illegal practices they'd been engaging in, largely to do with QuickTime - they had paid a contractor to develop an alternative but given that company too little time to develop something from scratch; the contractor made liberal use of QuickTime code (i.e. stole it) and delivered it to MS as "Video for Windows" and Apple found out about it. Apple would have won, but was running out of cash and might not have survived until the case concluded. So Jobs traded away a risky future payout for something that he could nail down and move on from.
And if there's one thing that can be said about Bill Gates when he was running Microsoft, it's that he was a ruthless negotiator. He got to settle the QuickTime issue with Apple for a pittance, and he got to point to Apple as a viable competitor when the DOJ was making rumblings about MS being a monopoly. To top it off, he got to publicly claim that he saved Apple, and Jobs couldn't say boo. But the truth gets out.