LeEco & Vizio merger officially cancelled
Way back in April of last year, we noted that Vizio (pvt) was considering buying back 2.43m shares from AmTran (2489.TT), reducing AmTran’s stake to 12% and opening the door for another investor to help them expand its worldwide share. The transaction was said to be part of an interest in the company by LeEco (300104.CH - formerly LeTV), a Beijing-based content provider and recent entrant into the Chinese TV market (4m units last year). In July 2016, LeEco announced its intent to buy Vizio for $2b and brought in Hong Kong based Sunac China Holdings (1918.HK) as an investor in LeEco (8.6% stake in subsidiary LeTV, 16% stake in LeVision Pictures and a 33.5% stake in an LETV sub), along with another $2.44b investment from another group of Chinese investors to reduce the financial burden of the Vizio acquisition.
The Vizio acquisition would have placed LeEco as the 3rd largest TV brand worldwide, behind South Korean giants Samsung Electronics (0056930.KS) and LG Electronics (066570.KS) and ahead of Chinese rivals Hisense (600060.CH), TCL (000100.CH) and Skyworth (752.HK), which might have caused the US government to hold back its approval, as it has for a number of other recent potential acquisitions, but given that the acquisition would be entirely consumer oriented, the US government gave its approval. The Chinese government however held its approval, and the deal was postponed from the ‘end of 2016’ timeframe.
The final end to the acquisition came yesterday when the companies jointly announced that the deal had been cancelled due to ‘regulatory headwinds’, which would likely be the understanding that Chinese authorities would not allow the deal to be made. The Chinese government, through the State Administration of Foreign Exchange, began scrutinizing deals over $5m (formerly $50m) where capital would be leaving the country late last year, as outbound capital investments soared ($530.9b in the 1st 9 months of 2016) after the 6% depreciation in Chinese currency last year.
Now the two companies are said to have reached some form of partnership agreement but speculation is still rife that Vizio might reconsider an IPO, which had been speculated early last year before the LeEco negotiations began, giving both founder William Wang and employees a chance to liquefy a portion of their investment, but LeEco faces a less sanguine future as it has been accused of overextending itself financially in order to expand its ‘empire’ into a variety of side businesses. The joint agreement will hopefully still allow Vizio to expand to China, using LeEco content, but Chinese regulators took the outbound financial characteristics to heart in order not to exacerbate the continued pressure on the yuan.
The Vizio acquisition would have placed LeEco as the 3rd largest TV brand worldwide, behind South Korean giants Samsung Electronics (0056930.KS) and LG Electronics (066570.KS) and ahead of Chinese rivals Hisense (600060.CH), TCL (000100.CH) and Skyworth (752.HK), which might have caused the US government to hold back its approval, as it has for a number of other recent potential acquisitions, but given that the acquisition would be entirely consumer oriented, the US government gave its approval. The Chinese government however held its approval, and the deal was postponed from the ‘end of 2016’ timeframe.
The final end to the acquisition came yesterday when the companies jointly announced that the deal had been cancelled due to ‘regulatory headwinds’, which would likely be the understanding that Chinese authorities would not allow the deal to be made. The Chinese government, through the State Administration of Foreign Exchange, began scrutinizing deals over $5m (formerly $50m) where capital would be leaving the country late last year, as outbound capital investments soared ($530.9b in the 1st 9 months of 2016) after the 6% depreciation in Chinese currency last year.
Now the two companies are said to have reached some form of partnership agreement but speculation is still rife that Vizio might reconsider an IPO, which had been speculated early last year before the LeEco negotiations began, giving both founder William Wang and employees a chance to liquefy a portion of their investment, but LeEco faces a less sanguine future as it has been accused of overextending itself financially in order to expand its ‘empire’ into a variety of side businesses. The joint agreement will hopefully still allow Vizio to expand to China, using LeEco content, but Chinese regulators took the outbound financial characteristics to heart in order not to exacerbate the continued pressure on the yuan.
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