Chinese TV and phone maker LeEco is acquiring U.S. TV manufacturer Vizio in an all-cash deal valued $2 billion, both companies announced at an event in Los Angeles Tuesday. Vizio will continue to operate under its own brand as a wholly owned subsidiary of LeEco.
“Vizio is a critical part of LeEco’s entry into the U.S. market,” said LeEco SVP Winston Cheng at the event. LeEco founder, chairman and CEO YT Jia said that LeEco will officially celebrate its entry into the U.S. in October.
“As the owner and father of Vizio, I’m really reluctant to let it go,” said Vizio founder William Wang. But with the new ownership, Vizio could grow beyond the U.S. and become an an even player in the TV market. “Together, let’s change this world again,” he said.
Vizio has been one of the biggest TV brands in the U.S. for the last couple of years with a market share of over 20 percent, thanks in large part to prices that were below those of competitors like Samsung and LG. Vizio filed papers to go public with the SEC in 2015, but may have decided to forgo those plans due to volatile markets, and instead opt for safer cash from LeEco.
LeEco for its part is largely unknown in the U.S. so far, but has been a force in China for some time. The company started a video streaming service in that country in 2004, and has since expanded to produce phones as well as TVs and streaming devices, and is now expanding into virtual reality, connected bicycles and even electric cars.
LeEco’s grand plan is to use these and other devices to make money with content and services. Across all of its services, LeEco already has 730 million monthly active users, Chang said.
LeEco has also long been active in the content creation space with its LeVision subsidiary; one of the movies it co-financed and distributed is “The Expendables 2.” The company is also delivering its own streaming services on each of its devices, and has plans to offer localized content offerings in each of its new markets. In addition to movies, LeEco also distributes music and sports content to Chinese consumers.
To stress the importance of content for LeEco, the company brought famed Chinese director Yimou Zhang and former Paramount and Dreamworks president Adam Goodman on stage. Goodman argued that TVs and home theater setups are going to play an ever-bigger role for Hollywood. “It’s the future of entertainment,” he said.
LeEco has been aggressively pushing to expand into the U.S. in recent months. The company recently moved into a new 86,000-square-foot office space in Silicon Valley, and has been courting talent from Google, Samsung and others.
The acquisition of Vizio could help to further fuel those efforts, including any attempts to go retail. Chinese companies like LeEco and Xiaomi have long relied on online shopping to reach consumers in China, but customers in the U.S. are much more used to buying TVs and even phones in store. Vizio’s existing relationship with retailers like Walmart could help to get other LeEco products on shelves as well.
The Vizio acquisition is expected to close in the fourth quarter of 2016. As part of the transaction, LeEco will own 49 percent of Incscape, Vizio’s data business that has been providing content recognition and ad targeting services on Vizio TV sets. Inscape will be spun out into a separate company, which will be run by Vizio’s current CEO William Wang. LeEco will license Inscape’s services for 10 years.