LeEco gives up Vizio purchase deal

Conglomerate Le Holdings Co, also known as LeEco, has called off its proposed $ 2 billion takeover of US TV maker Vizio Inc, citing “regulatory headwinds.”

The two companies instead agreed on a new collaborative partnership, which is expected to be a win- win, according to a joint statement LeEco sent to the Global Times Tuesday.

Under the new agreement, LeEco will continue exploring opportunities to incorporate its Le app and content within the US partner’s connected CE platform, and Vizio’s products will be brought into the Chinese market.

The statement did not elaborate on the “regulatory headwinds.”

“Chinese authorities are stepping up measures to tighten capital outflows, which may add some pressure,” Wang Yanhui, head of the Mobile China Alliance, told the Global Times Tuesday. But he said that the deal’s cancellation was likely also caused by LeEco’s capital shortfalls.

Over the past year, LeEco, which is engaged in self- driving cars, online content and smart devices, expanded at a pace that billionaire founder Jia Yueting acknowledged had strained the company’s capital and resources.

Separately on Tuesday, an unidentified source familiar with the matter told Bloomberg that LeEco plans to cut more than one- third of its US workforce, as it missed its projections for 2016 sales. A PR representative of LeEco declined to comment.

Wang views the scaling back as a positive sign. “LeEco has yet to gain a strong foothold in its home market, so it’s not the right time to expand abroad,” he said.

On Monday, LeEco’s Shenzhen- listed unit estimated that its first- quarter net profit was 103 million yuan ($ 14.9 million) to 132 million yuan, similar to or less than the 115 million yuan recorded a year earlier.

In mid- January, LeEco raised a 16.8 billion yuan strategic investment from a consortium led by property developer Sunac China Holdings. On March 28, Sun Hongbin, founder of Sunac, was quoted in media reports as saying that LeEco has a bright future, but it should start cutting businesses that are losing money.