Chinese technology conglomerate LeEco Inc. abandoned its planned $2 billion acquisition of US television maker Vizio Inc. because of regulatory issues, and instead is 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 Monday in an emailed statement. “We continue to believe that there is great synergy between the two companies.”
LeEco, the holding group for businesses controlled by billionaire Jia Yueting that span electric cars and media to smartphones and TVs, had announced the agreement to acquire Irvine, California-based Vizio last July. The deal was intended to create a foundation for branding and acquiring US customers. Bloomberg News reported earlier this month 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 said late last year 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. Earlier this month, LeEco delayed paychecks for its US operation, which has suffered from key executive departures.
Changing Regulatory Landscape
Chinese agencies have heightened scrutiny of outbound purchases over the past several months, an effort that coincides with a stronger government hand to limit capital outflows. Chinese policy makers 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, said Chris Dong, a research director at IDC.
“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 as V Inc. in 2002, had been planning an initial public offering in 2015. The company is known for its low retail prices on televisions and has entered other areas of consumer electronics such as computers, smartphones and tablets.
The companies said they were looking for ways to bring Vizio’s products to the China 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 Leshi Internet Information & Technology Corp., one of the first companies in China to stream copyrighted TV shows and movies to paying subscribers. LeEco is affiliated with publicly traded Leshi.