LeEco And Vizio Call Off Acquisition, Blame “Regulatory Headwinds”

Image courtesy of Ryan Finnie

Last year, the Chinese electronics company LeEco announced plans to acquire the popular television brand Vizio for around $2 billion. Today, the two companies said they’re calling the merger off, blaming “regulatory headwinds.”

What does “regulatory headwinds” mean? According to reports in Variety and Gizmodo, that phrase may be referring to recent problems that Chinese companies have had in securing approval to acquire foreign companies, and the government is limiting how much capital leaves the country.

LeEco may also be in a cash crunch, and put land that it purchased for a headquarters in Silicon Valley up for sale after planning a 12,000-person U.S. headquarters for the site.

The statement that the companies plan to keep working together might not be press release boilerplate. They’re uniquely suited to help each other. LeEco still doesn’t have a big presence in the U.S. market. Meanwhile, Vizio is a popular brand of affordable TVs here, but doesn’t have much of a presence in China.

LeEco first came to prominence as a streaming video service, like a Chinese Netflix. Since then, it has grown dramatically. It sells TVs, smartphones, and is a major investor in an electric car company.

What all of these things have in common is that they need streaming entertainment software, the content ecosystem for which the company is sort of named. Even cars have infotainment systems, which will become more important and more elaborate once self-driving cars reach the consumer market. In the future, televisions themselves may become less important than the software that runs them.

Since the companies announced their deal last summer, Vizio had to pay a $2.2 million fine to the Federal Trade Commission for tracking and reporting what its smart TV customers watched without telling them. As part of the deal, Vizio’s viewer data analytics business would have been spun off into a separate company.