On April the 11th, the Chinese conglomerate, LeEco, announced they had dropped their planned 2 billion dollar acquisition of United States television manufacturer Vizio. While the company stated regulatory issues as the primary driving factor behind the decision, it is also important to note their recent financial struggles. The deal was initially announced in July, but will now come to an end with a company representative blaming the issue on a “Chinese policy factor“. Additional details were not provided. In reality, it may be that LeEco was simply too ambitious. The company originally started out as a video streaming website similar to Netflix. Then, they began delving into consumer electronics and automobiles.
At one point, LeEco hoped to target Tesla Motors by producing their own premium electric automobiles. Over the past few months, LeEco has experienced severe financial troubles, which founder Jia Yueting, has referred to as a “big company disease.” The founder and chairman simultaneously blamed the problem on the haste of business growth. The writing is on the wall. Just last month, it was reported that the company was interested in selling their 49-acre Silicon Valley Property, which was purchased from Yahoo just a year earlier. It should also be noted that China has stepped up scrutiny of outbound deals during the past few months in hopes of stabilizing the yuan and preventing capital outflows.
The Dalian Wanda Group’s intentions of buying Dick Clark Productions for 1 billion dollars was terminated and reports point the fingers at Beijing’s new hardline stance. Now, LeEco and Vizio will enter into a new agreement, which will see LeEco’s app and content added to Vizio’s existing platform. Simultaneously, Vizio products will enter the Chinese market. While it may look bad for LeEco, some suggest it could be beneficial. The money saved from the failed acquisition can be put towards reestablishing a relationship with LeEco’s supply-chain partnerships and to restart full-scale production. Nevertheless, it appears LeEco has a rocky road ahead.