Mergers & Acquisitions

Chinese smart-TV maker LeEco buys US peer Vizio

PUBLISHED : Tuesday, 26 July, 2016, 10:30pm
UPDATED : Wednesday, 21 September, 2016, 9:19am

Chinese technology giant LeEco has acquired US television manufacturer Vizio in a US$2 billion deal as it looks to expand its white goods business in the United States and become one of the top smart TV vendors globally.

The deal was announced on Tuesday in Los Angeles at an event jointly held by LeEco and Vizio. Winston Cheng, global head of corporate finance and development for LeEco, said at the event that the acquisition of Vizio is a “critical part of LeEco’s entry into the North American market”, as the company seeks international expansion outside of its home market in China.

Apart from providing online video content, LeEco also produces smart televisions, smartphones and has invested in developing an autonomous electric car with Los Angeles start-up Faraday Future.

Vizio is known as one of the market leaders for smart televisions in the US, with over 20 per cent market share for its televisions sets, according to market research firm Strategy Analytics.

The US company, which prides itself on selling quality televisions at affordable prices, sells over 8 million units annually, and has a total of over 17 million units of Vizio televisions installed in the US.

The acquisition is expected to be completed in six months following regulatory approvals. As part of the deal, LeEco will also take a 49 per cent stake in Vizio’s data software service Inscape, which will be spun off and operate as a separate, privately owned company.

Inscape is Vizio’s content recognition software that pulls datapoints on the type of content its viewers are watching, making it useful for TV ratings and targeted advertisements.

William Wang, co-founder and chief executive of Vizio, will own the remaining 51 per cent stake and take on a new role as chairman and chief executive of Inscape once the deal is successful.

At the event, Cheng said that Vizio will continue to operate under its own brand, although LeEco will support Vizio with Internet, technology, content and cloud services. Both LeEco and Vizio are expected to draw in over US$4 billion in revenue in the first half of 2016, and LeEco is expecting double-digit revenue increases over the next few years, he added.

Jia Yueting, chief executive of LeEco, said that by 2017, the company hopes to sell over 20 million television units annually, making the company one of the top smart TV manufacturers in the world.

LeEco plans to import its over-the-top (OTT) business model to the US, and is expected to launch the service in September, Jia said. The company’s on-demand video services would pit LeEco against the likes of established video streaming sites such as Netflix, Hulu and Amazon.

LeEco’s ambition to tackle the North American market is no secret. In April, it set up its US headquarters in Silicon Valley and bought about 200,000 square metres of land in Santa Clara from Yahoo for US$250 million in June.

The Chinese tech conglomerate will likely take over Vizio’s manufacturing plants in Mexico, allowing it to leverage the company’s expertise in producing and selling television sets in the US.

In July last year, Vizio filed for an initial public offering with US regulators, outlining plans to raise US$172.5 million to help fund its expansion in the US and overseas. It is unclear if Vizio will still go public if the deal with LeEco is successful.

LeEco made its first foray outside of China in January, when it started selling smartphones in India, the world’s second largest smartphone market. China, the largest smartphone market, is experiencing a slowdown as users shift towards handset upgrades.

Media reports also suggest that LeEco may be planning to bring its smart televisions and even virtual reality headsets to India, following the success it has seen with smartphone sales.

In a flash sale with Indian e-commerce platform Flipkart, LeEco sold 70,000 of its Le 1s smartphone in two seconds, similar to overwhelming consumer response of fellow Chinese smartphone maker Xiaomi, which first entered the Indian market in 2014.

Lenovo, which is the world’s largest PC maker, is currently the only Chinese smartphone manufacturer listed in the top five smartphone vendors in India for the first quarter of this year, according to a report by research firm Canalys.