Chinese hardware giant LeEco has recently been making headlines, more often than not. Presently, the cash-deprived company is yet again making headlines over its $2 billion acquisition deal with U.S-based television maker Vizio. Several reports from Chinese media suggest that the transaction is currently in jeopardy — meaning it has either been abandoned for the time being or canceled after all.
Sources aware of the developments suggest that the transaction has currently been stalled and the reasons for the same are two-fold. Firstly, LeEco is facing restrictions on the transfer of capital investments from China to other overseas countries. China is currently limiting the spending outside their country to control the drain of its foreign-exchange reserves and control currency depreciation. The other reason is fairly straightforward and everyone should be aware of the same — LeEco’s coffers are currently depleted and the Chinese giant is scaling back operations.
A spokesperson did comment on the pending acquisition deal but didn’t elaborate on it any further. The spokesperson just said,
The deal is pending regulatory approval.
And for this speculation, it comes as a significant development at a rather important time for the Chinese giant. The analysts, as well as critics will be surprisingly elated to hear that the LeEco-Vizio acquisition deal has fallen through. They were quite wary of the same when the Chinese giant had first announced it last year. This might come as a curse for both tech giants involved but as a blessing in disguise for critics who’re satisfied with LeEco’s bombastic sales in its homeland China.
LeEco, for those unaware, is currently suffering from a massive capital crunch due to its ambitious goal of rapid expansion across the globe coupled with back-to-back product release timeline. The founder then also admitted that the company set sight on far-reaching goals and was doling out cash relentlessly. It is currently doing damage control and has bagged fresh investments to the tunes of over $4 billion to keep its ship afloat for some time.
Back in July last year, LeEco announced that it would acquire the widely popular TV maker Vizio. This decision helped the company build some hype around their brand and their expansion plans to the United States. It had only stepped foot into one of the toughest markets in the world with its smartphone and TV releases and it was planning to set up headquarters in the country. But, LeEco was soon hit with the aforementioned realization and the whole situation has since been spiraling downwards.
The Chinese company is in no position to be spilling out capital on deals as large as this one. It recently also decided to sell off the land it had purchased from Yahoo to set up its American offices for around $250 million. Chinese developer Genzon Group is ready to pick the same for $260 million, which is $10 million more than what the company spent. The company has also scaled back its operations in India as well. It recently handed out pink slips to over 85 percent of the staff members and some major senior-level executives also called it quits at the Chinese giant.