Sharp Corp CEO Kozo Takahashi and Foxconn Chief Executive Terry Gou plan to meet on Friday in China, a person familiar with the matter said, a day after the world's largest contract maker of electronic goods put its takeover of the loss-making Japanese firm on hold.
Shares in Sharp plummeted 15 percent on Friday after sources said previously undisclosed liabilities were responsible for the 11th-hour delay.
Loss-making Sharp announced on Thursday it had decided to sell a two-thirds stake to Foxconn, formally known as Hon Hai Precision Industry and a major Apple supplier.
Just hours later, Foxconn said it would not sign the deal until it had clarified some "new material information" from Sharp. It did not elaborate.
The Japanese group had contingent liabilities that amounted to around 300 billion yen ($2.7 billion), three sources familiar with the matter said.
One of the sources said Foxconn's own due diligence had uncovered liabilities just under 100 billion yen.
The sources, who declined to be identified due to the sensitivity of the matter, did not elaborate on the nature of the liabilities. Reuters has not seen any documents regarding the new information.
A spokesman for Foxconn declined to comment on the issue. Sharp also declined to comment.
"That puts the entire deal in jeopardy," Jefferies analyst Atul Goyal said in a note to clients. "This is especially so given the dramatic back and forth that happened between Sharp and Foxconn in 2012, when Foxconn agreed to acquire a stake in Sharp but then later walked away."
Shares in Sharp slid 15 percent on Friday morning, adding to losses a day earlier as planned share dilution under the deal looked larger than expected. The stock has fallen 27 percent over the past two days.
Foxconn's shares lost over 1.5 percent in trading around midday.
The last minute hitch casts doubt on a deal that would have marked the conclusion to five years of courting by Gou and the opening up of Japan's insular tech sector to foreign investment.
In a 31-page filing, Sharp said it would issue around $4.4 billion worth of new shares to give Foxconn a two-thirds holding. Foxconn's investment is set to total more than 650 billion yen ($5.8 billion), a separate source familiar with the matter said.
If a deal does go through, it would boost Foxconn's position as Apple's main contract manufacturer and enable Sharp to start mass-producing organic light-emitting diode (OLED) screens by 2018, around the time Apple is expected to adopt the next-generation displays for its iPhones.
Bringing Sharp under Foxconn's umbrella could help Apple wean itself off rival Samsung Electronics as a supplier.
OLED screens are thinner, lighter and more flexible than current displays. South Korea's Samsung Display and LG Display are also investing heavily in the new technology.
But efforts to patch up the deal could be impeded by lingering distrust over the collapse of the 2012 deal to form capital ties. That distrust was one reason that some Sharp officials, until recently, preferred a lower offer by a state-backed fund, the Innovation Network of Japan, according to sources familiar with the matter.
Analysts have said Sharp needs to find a buyer or secure some form of bailout by the end of March due to its weak finances.
Although the century-old Japanese firm was once a highly profitable manufacturer of premium TVs, it has struggled in recent years as massive investments in advanced liquid crystal display (LCD) plants failed to pay off due to fierce price competition with Asian rivals. Two bank bailouts since 2012 have failed to help turn its business around.