The news around Huawei possibly selling off its budget smartphone brand Honor, is getting even stronger now. According to a fresh Reuters report, the Chinese smartphone giant will sell Honor to Digital China and the Shenzhen government for 100 billion yuan ($15.2 billion). The official announcement is expected to come as soon as this Sunday, according to the sources.
People familiar with the matter told the news agency that it will be an all-cash deal where Huawei will transfer brand, research & development capabilities and supply chain management of Honor to the buyer.
The details coming out of this fresh report is similar to the reports that came out earlier in October. Digital China, a major distributor for Honor, will be among the top two shareholders in the budget smartphone brand with an almost 15% stake, once the transaction is completed. Digital China will be making use of bank loans to fund this large size deal, according to the sources.
On the part of the rather rare government acquisition, at least three investment firms with the help of the government of financial and technology hub Shenzhen, will acquire a 10-15% stake in Honor each.
The sources add that after the transaction is completed, Honor will retain the majority of its management team and 7,000-plus workforce. It also plans to file for its first IPO in the next three years, according to the sources.
The move to sell its budget smartphone unit, Honor is an end result of the trade sanctions enforced on Huawei by the US government. American companies were restricted from carrying out business with Huawei Technologies which resulted in huge losses for the second-largest smartphone company in the world. However, the political atmosphere has since changed in the USA after the Trump administration lost in the recent elections.
The sources say that the change in American administration will have very little impact on the current scenario with Huawei. The Chinese company is still expected to be perceived as a ‘security risk’ to the US.
Earlier, reports also suggested that Huawei is selling off the Honor brand to focus and solidify its position in the premium smartphone segment and recover the losses made during the recent period. Companies like TCL and Xiaomi were also in the race to buy the Honor brand, but in the end, it seems Digital China emerged out as the winner.