LeEco in retreat after abandoning US$2b takeover of American TV maker Vizio

Cash-strapped Chinese internet conglomerate LeEco may look to fortify its businesses in China, as the company beats a retreat from an ambitious US expansion by scrapping its US$2 billion acquisition of American television maker Vizio.

In a joint announcement made overnight in the US, LeEco and California-based Vizio said their merger “will not proceed due to regulatory headwinds”, which appears to reflect the current state-of-affairs under Beijing’s tightened control on capital outflows.

The two companies said they have reached a new agreement to “engage in a collaborative partnership” that will “bring Vizio products to the China market”.

“This not the first time that a Chinese company has had to abandon an acquisition, either because of capital controls or foreign government policy,” Kitty Fok, the managing director at IDC China, told the South China Morning Post on Tuesday.

“With the financial challenges faced by LeEco since last year, refocusing in China to build products and strengthen its business strategy is the right thing to do for the company.”

Mainland China’s outbound mergers and acquisitions activity had tumbled 64 per cent in the first quarter to US$31 billion, down from a high of US$86 billion a year ago due to the government’s tough capital controls, according to global consultancy McKinsey.