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Vizio ‘Happy Either Way’ With $2B Deal Shaky

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A looming deadline for Vizio Inc.’s $2 billion sale to LeEco has cast further doubt the China-based conglomerate can close the deal amid ongoing financial woes.

“The deal is still in progress, subject to LeEco capabilities—we have fulfilled our obligation,” Vizio founder and Chief Executive William Wang told the Business Journal last week. “If they can’t come up with the payment, we will decide what to do. It’s not something I’m worried about. I’m happy either way.”

Wang, who was slated to cede his role at the Irvine-based consumer electronics brand after the sale, declined to provide the deadline date—he said it was “soon”—citing nondisclosure agreements.

Vizio closed out last year as the No. 2 seller of TVs in the U.S. and Canada, with a 16% market share, according to London-based IHS Markit, which reported that 43.5 million TV units were sold.

Samsung was No. 1.

Vizio held the same share in 2015, according to IHS, which has yet to publish last year’s sales data on smart TVs, a segment Vizio typically leads in the U.S. and Canada.

The pending sale of Vizio was first announced in late July and was projected to close by year-end by LeEco and Vizio representatives. A strained regulatory relationship between the U.S. and China was thought to have slowed progress in finalizing the deal, but U.S. regulators approved the sale more than a month ago.

Chinese regulators have been known to hold up deals involving U.S. companies when Chinese employees are affected. Vizio’s entire companywide employment of 477 through December is in the U.S., with about 230 at its Spectrum headquarters, according to Business Journal research.

Vizio was the sixth largest private company based in OC last year based on $3.5 billion in sales in 2015.

Early Concerns

The LeEco purchase first raised concerns among analysts in November as chatter picked up that the company hit a cash crunch due to expanding product lines and markets.

LeEco Chief Executive and founder Yueting “YT” Jia, in a letter to employees that was obtained by Bloomberg at the time, said, “We blindly sped ahead, and our cash demand ballooned. We got over-extended in our global strategy. At the same time, our capital and resources were in fact limited.”

The development came about a month after LeEco’s U.S. launch event in San Francisco, where the company spent more than two hours promoting its third-generation smartphone, an Android smart bike, 85-inch smart TV, updated subscription services, a virtual reality headset, and an autonomous electric vehicle.

The Beijing-based company barely mentioned Vizio during the long press event, highlighting instead its plans to take on the likes of Apple, Tesla, Samsung, Amazon, Netflix and Disney on their own turf.

LeEco in January announced it secured a $2.4 billion investment led by Tianjin-based Sunac China Holdings Ltd. that essentially provided a lifeline for the cash-strapped company.

Wang, who built Vizio from a relatively unknown startup in 2002 to a titan in TV and soundbar sales by melding supply chain expertise with partnerships with big-box retailers, doesn’t seem fazed by the recent setbacks.

Inscape

A final deal with LeEco would position Wang to become chairman and chief executive of a spinoff of Vizio’s developing Inscape data business, which was recently dealt a setback of its own.

Vizio in early February agreed to a $2.2 million agreement to settle charges that it violated unfair trade practices and consumer protection laws by tracking the viewing habits of smart TV owners without their knowledge or consent.

Inscape captured “second-by-second information” from cable, broadband, set-top box, DVD, over-the-air broadcasts and streaming devices, according to the Federal Trade Commission and the office of the New Jersey attorney general.

The product can capture up to “100 billion daily anonymized viewing data points” from Vizio connected TVs that “can be used to generate intelligent insights for advertisers and media content providers,” the company highlighted in a 2015 filing to potential investors as it pondered an initial public offering.

The Federal Trade Commission complaint alleged Vizio aggregated specific demographic information, such as gender, age, income, marital status, household size, education level, home ownership, and household value, and sold the data to third parties, which used it for various purposes, such as targeted advertising.

Court Mandate

A federal court order mandates the company prominently disclose and obtain express consent for its data collection and sharing practices. It also requires Vizio to delete data collected before March 1, 2016 from about 11 million TVs, and implement a comprehensive data privacy program with biennial assessments.

The settlement prompted Wang and Vizio to rethink the business model, a possibility first reported by the Business Journal in last week’s edition.

“Together with government, we’re learning about the privacy issue better,” said Wang, who’s set to retain a 51% stake of the burgeoning data business line that will spin out as a separate, privately owned company. “We’re working hand-in-hand with the government to establish the right way to benefit the advertisers and the content producers.”

Wang casually declined to speculate on whether LeEco will be able to complete the deal before the impending deadline.

“I don’t want to speculate—I don’t have the visibility of their capability,” he said. “We’ll see how it goes.”

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