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Vizio sues LeEco over failed merger

Vizio sues LeEco over failed merger


Vizio says LeEco had already ‘begun to collapse’ when $2 billion deal was announced

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Vizio has filed two lawsuits against troubled Chinese electronics company LeEco over an attempted merger between the two companies that unraveled and eventually collapsed earlier this year. The US TV maker alleges that even at the time of the deal’s announcement, LeEco had already “begun to collapse due to their severe cash flow and financial problems.” LeEco’s money woes have been a running story for months, and Vizio’s sharply worded complaint says that the whole acquisition was a front for LeEco to create a positive impression of its financial standing. That directly contradicts what both companies said in April, when they jointly cited “regulatory headwinds” as the primary factor in the merger’s failure.

Vizio’s primary federal complaint seeks $60 million in damages in addition to punitive damages. The lawsuit says that during negotiations both in Beijing and Irvine, California (where Vizio is based), LeEco executives fraudulently claimed the company was financially healthy — all the while knowing there was no way LeEco would actually be able to make good on the $2 billion transaction.

Vizio says LeEco failed to disclose its huge money problems during merger negotiations

But LeEco, Vizio claims, “desperately needed to either obtain the instant financial stability, credibility, and resources that a merger with Vizio would bring, or at least to create a widespread and dramatic public impression of their own financial health and well-being to grow or continue in business that would come with the announcement of such an intended merger.”

Vizio accuses LeEco of failing to fully cover the $100 million buyers termination fee that was written into the deal; only $40 million has been handed over so far. Vizio also claims that LeEco accessed “confidential customer information” after the merger was announced and used that data “strictly for its own purposes.”

After the merger fell apart, Vizio and LeEco announced that they would instead form a partnership that would result in two things. First, LeEco would bring some of Vizio’s products to China. Second, Vizio would add a LeEco app to its television software. But even that arrangement failed to come together. Vizio says efforts to move forward with the joint venture were met with “radio silence” and that LeEco was really just trying to avoid paying the full breakup fee.

Now, suing a China-based company in federal court might not prove very fruitful, so in a second lawsuit seeking $50 million, Vizio instead targets one of LeEco’s subsidiaries, Le Technology, which operates out of California. In recent weeks, LeEco’s chairman has had some assets frozen amid growing complaints from the company’s creditors and partners. And Faraday Future, which LeEco’s Jia Yueting holds a major investment in, has cancelled plans for an electric car factory that was planned for Nevada.