On March 28th, according to people familiar with the matter, subject to increasingly tight foreign exchange control policies, LeTV's acquisition of Vizio may be aborted.

It is reported that in July last year, LeEcoGlobal, a non-listed entity of LeEco, announced the acquisition of US television manufacturer Vizio for US $ 2 billion. The transaction was originally planned to be completed by the end of last year, but after entering 2017, both parties were in a silent state, and they have not announced the latest progress. With the recent changes in foreign exchange outbound policies, this transaction has also increased dramatically.

According to public information, Vizio is the largest TV manufacturer in the United States and has been adhering to the "high-end product, parity strategy". As of the second quarter of last year, 22 million smart TVs have been sold. Its founder is Chinese American entrepreneur Wang Wei.

In addition to LeTV, due to the new foreign exchange exit policy, a number of well-known overseas M & A projects also face risks.

It is reported that recently SOHO China has cancelled or slowed down the plan to sell its properties such as Hongkou SOHO. Chairman Pan Shiyi revealed that he intended to use the proceeds of the sale for overseas investment, but the company decided to cancel the sale plan due to foreign exchange control funds unable to leave the country.

A similar overseas transaction abortion has frequently broke out recently. A few days ago, Geely announced its withdrawal from the bid for Malaysian automaker Proton, but did not disclose the reasons. Not long ago, Wanda's acquisition of DCP, a well-known TV production company in the United States, was declared stranded. DCP even filed a lawsuit to obtain a $ 25 million reverse termination fee from Wanda.

The background of this series of events is the rapid increase in the number and amount of overseas investments by Chinese companies in the past few years. In 2015, China's foreign direct investment reached a record high of US $ 145.67 billion, ranking second in the world for the first time. This figure also exceeded China's actual use of foreign capital during the same period (135.6 billion U.S. dollars), and achieved net exports under capital.

Along with the depreciation of the renminbi, the Chinese government began to gradually release the signal of tightening foreign exchange policy last fall. In November last year, China ’s foreign exchange regulatory agency and the Ministry of Commerce issued a warning to banks that it may veto corporate acquisitions of assets other than its main business and require special approval for transfers of US $ 5 million and above. In December last year, the Ministry of Commerce and the State Administration of Foreign Exchange stated once again that they will monitor overseas transactions in the real estate and entertainment industries.

During the two sessions this year, the new Minister of Commerce Zhong Shan criticized Chinese companies for "blind, irrational foreign investment". Central Bank Governor Zhou Xiaochuan also stated that some overseas mergers and acquisitions do not comply with China's industrial policy requirements for foreign investment, "such as Invest in some sports, entertainment, clubs. "The outside world generally believes that this releases a strong signal of capital outflow control.

At present, many well-known transactions of overseas mergers and acquisitions by Chinese companies in 2016 are still in an incomplete state. For example, Giants and others bought PlayTIka, a casual social mobile game company, for $ 4.4 billion.

PricewaterhouseCoopers disclosed that of the 51 overseas mergers and acquisitions by Chinese companies in 2016 that amounted to more than US $ 1 billion, less than 70% of them have actually been completed so far, including LeTV's acquisition of overseas acquisitions of star private companies such as Vizio.

Some media predict that Chinese companies' overseas mergers and acquisitions in 2016 will have 4 billion to 7.5 billion US dollars-or one third of the aborted transactions may be delayed.

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August 20, 2022