Sharp Corp.
Woman walks past the Sharp Corp's Logo at an electronic shop in Tokyo

South Korean technology giant Samsung Electronics will take a 3.04 percent stake in its struggling Japanese peer Sharp Corp in a capital alliance that will strengthen LCD supplies from Sharp to Samsung.

Sharp will issue new shares to Samsung's Japanese subsidiary, Samsung Electronics Japan, through a third-party allotment and will receive capital investment of about 10.4bn yen ($112m, £70m), according to a statement.

Sharp will issue 35.8 million shares, representing 3.08 percent voting rights in the company, at a price of 290 yen per share.

Following the news, Sharp shares rose as much as 17 percent on the Tokyo stock exchange. They were trading at 341 yen, up 14.05 percent, at 1.00 am EST.

"The purpose of this third party allotment capital increase 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," Sharp said.

Sharp, which is currently supplying Samsung with LCD panels, would provide long-term, stable and timely supply of LCD panels for large-size TVs and mobile devices under the deal. The company will use 6.9bn yen from the investment to develop a new technology for LCDs with high definition features, while a 3.2bn yen portion will be used for the rationalisation of manufacturing facilities for LCDs used in mobile devices.

Sharp's business has been hurt by a decline in global demand and falling prices for its products. It received a $4.4bn bailout from banks in October 2012 after having mortgaged its offices and factories in Japan.

Earlier, Sharp projected to record a loss of 450bn yen for the year to 31 March 2013, and said it has been trying to restructure its operations with measures including job cuts. However, the firm found it difficult to raise money after its credit rating was downgraded to junk status last year.

The investment is expected to help Sharp in reviving its business, along with becoming a key supplier to the fast-growing Samsung.

In March 2012, Sharp signed a deal with Taiwan's Hon Hai, in which the latter would acquire a 9.9 percent stake in Sharp for 550 yen per share. The deal is yet to be concluded.