Wed, Apr 12, 2017 - Page 11 News List

LeEco drops Vizio acquisition over regulatory issues

Bloomberg

Chinese technology conglomerate Leshi Internet Information & Technology Corp (LeEco, 樂視) abandoned its planned US$2 billion acquisition of US TV maker Vizio Inc because of regulatory issues and is instead exploring other ways to incorporate LeEco’s content into Vizio’s devices.

“The merger agreement to acquire Vizio will not proceed due to regulatory headwinds,” the companies said on Monday in an e-mailed statement. “We continue to believe that there is great synergy between the two companies.”

LeEco, the holding group for businesses controlled by Chinese billionaire Jia Yueting (賈躍亭) that span electric cars and media to smartphones and TVs, had announced the agreement to acquire Irvine, California-based Vizio in July last year.

The deal was intended to create a foundation for branding and acquiring US customers.

Bloomberg News earlier this month reported that the proposed acquisition was being held up by tighter controls on Chinese currency outflows.

The collapse of the deal is another sign that LeEco’s global expansion plans are faltering.

Jia late last year said the company was struggling to raise cash after the rapid expansion of his media and Internet empire.

Some suppliers said LeEco was behind on payments and the company was stripped of some sports broadcasting rights after missing payments on a contract.

LeEco earlier this month delayed paychecks for its US operation, which has suffered from key executive departures.

Chinese agencies have over the past several months heightened scrutiny of outbound purchases, an effort that coincides with a stronger government hand to limit capital outflows. Chinese policymakers have supported overseas acquisitions that help domestic companies gain foreign technology and strengthen industries seen as important drivers of economic growth.

The tighter regulatory scrutiny has been focused on Chinese companies that seek to buy firms outside their own main business, International Data Corp research director Chris Dong said.

“I think that the Chinese government sees Vizio as having no value add to the Chinese market in the future,” Dong said. “If they acquire Vizio they will probably have a bigger platform to play in the US, but that would require more money coming from China continuously.”

Vizio, founded by William Wang (王蔚) as V Inc in 2002, had been planning an initial public offering in 2015. The company is known for its low retail prices on TVs and has entered other areas of consumer electronics, such as computers, smartphones and tablets.

The companies said they were looking for ways to introduce Vizio’s products to the Chinese market and integrate LeEco’s app and content into Vizio’s platform.

Like other tech companies, LeEco’s vision is to offer a suite of connected hardware and services.

In 2004, Jia founded LeEco, one of the first companies in China to stream copyrighted TV shows and movies to paying subscribers.

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