LeEco: Vizio Merger Failed Because Of Chinese Authorities

September 9, 2017 - Written By Joshua Swingle

According to new court documents, LeEco suggests the Chinese authorities are to blame when it comes to their failed Vizio merger. LeEco’s journey over the past year hasn’t exactly been easy, with the company initially announcing a $2 billion deal with Vizio that would see the two companies merge in the hope of boosting LeEco’s presence in the US once it launched in the market. Unfortunately, the company ran into money troubles shortly after its American launch and eventually the deal with Vizio collapsed but, according to LeEco, it’s the fault of Chinese authorities.

After the collapse of the deal, Vizio eventually filed a lawsuit against the China-based company, citing fraud. The company says LeEco essentially misrepresented its financial status in order to agree on a deal with Vizio and keep investors happy. In fact, Vizio even claims LeEco was working on a way to reduce the $100 million break-up fee to $40 million, but believes that the agreement fell through because of LeEco’s lack of financing, meaning they are entitled to the $100 million break-up fee. LeEco’s response, on the other hand, paints a different story, with the company claiming that Vizio knew of the possibility that they could not come up with the financing for the deal. In addition to this, there was also the chance that either the American or Chinese authorities could block the deal. The latter party, according to LeEco, is the real reason the deal fell through, with the company stating that the “merger occurred at a time when China was taking a much stricter approach to currency controls and was denying approval of mergers determined not to be ‘strategic’ to China’s long term interests,” which would basically mean Vizio isn’t entitled to any money. Nonetheless, the American company disagreed and says the real reason for the Chinese regulatory disapproval was LeEco’s financial situation.

Eventually, both companies agreed upon the Mutual General Release Agreement, which will see Vizio receive $40 million from LeEco. It is believed Vizio saw the pay cut as a necessary compromise considering LeEco’s financial status, but it says the payment comes with the agreement of establishing a joint venture between the two, instead of the original merger. It’s said that the companies both had interest in utilizing certain technology from the other party, with Vizio being primarily interested in the Le App, which would make delivering entertainment to its TV’s much easier, while LeEco was interested Vizio’s Inscape Data, which tracks viewer use of televisions. Currently, though, it remains to be seen if both companies continue to work together.