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LeEco Backs Out of $2 Billion Vizio Acquisition

Chinese online video and consumer electronics upstart LeEco won’t be acquiring U.S. TV manufacturer Vizio after all: Both companies officially announced Monday that the deal is being called off “due to regulatory headwinds.”

Both companies said that they still intend to work together in some capacity, with plans including an app partnership as well as closer collaboration in China. A LeEco spokesperson also told Variety that calling off the acquisition won’t have any impact on LeEco’s other U.S. businesses.

LeEco had officially announced plans to acquire Vizio for $2 billion in cash last July as a way to kickstart its expansion into North America. However, the deal had yet to be approved by Chinese regulators, and sources indicated in recent months that LeEco was affected by tighter regulations to get Chinese capital out of the country.

Both companies could still benefit from a closer collaboration, provided that the willingness to work together actually still exists beyond Monday’s news release: LeEco is trying to get video publishers to be part of its EcoPass subscription service, and having access to an existing footprint of millions of smart TVs would give it a lot more leverage in those discussions. Conversely, Vizio hasn’t had much of a footprint in China, and LeEco could potentially help the company to sell its TVs to Chinese consumers.

Vizio and LeEco suggested as much in Monday’s statement: “Under the new agreement, LeEco and VIZIO will continue to explore opportunities to incorporate the Le app and content within the VIZIO connected CE platform, and engage in a collaborative partnership to leverage LeEco’s EUI (Ecosystem User Interface) platform, along with the brand’s exclusive content and distribution channels, to bring VIZIO products to the China market.”

LeEco’s ambitious U.S. expansion plans have been under scrutiny for some time. Just last month, reports surfaced that the company’s plans to build a huge office complex on a property formerly owned by Yahoo may have been called off as well. LeEco originally intended to build office space for 12,000 employees on a 49-acre property it acquired from Yahoo in 2016. But in March, Reuters reported that LeEco is looking to sell the property again.

The big question is what Vizio is going to do now. The deal with LeEco came together mere months after Vizio had filed for an initial public offering. With LeEco backing out of its acquisition, Vizio could theoretically look for another acquirer, or even once again get ready for an IPO.

However, a source close to the TV maker’s senior leadership recently told Variety that Vizio wasn’t rushing to go public any time soon if the LeEco deal were to fall through. The struggles of hardware makers like GoPro dissuaded Vizio’s leadership from that route, this source said. Instead, Vizio may just opt to operate as is. The source also said that Vizio’s leadership had lost confidence in the LeEco acquisition going through months ago.

 

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