Letv buy VIZIO and get a cash cow full of ambition and story


In the early morning of July 27th, Beijing time, LeTV held a conference in Los Angeles on the theme of "breaking the world to create an ecological world." It announced that it would acquire US-based TV maker Vizio for $2 billion. It is reported that this transaction will be subject to review by regulatory authorities and is expected to be completed in the next six months.

What kind of company is Vizio?

In the news release given by LeTV, LeTV mentioned: "The Levi acquisition of Vizio means that the company has occupied a large part of the U.S. TV market in an instant." So, what exactly does Vizio have to offer?

According to information provided by LeTV, the acquisition target Vizio is the largest television manufacturer in the United States and has been deeply engaged in the local TV market for nearly 15 years. Its philosophy is “Where Vision Meets Value” and it has core advantages in brands, supply chain and big data. As of the second quarter of 2016, the Vizio brand reached 150,000 racks of 8,000 channels in North America, and its distribution channel penetration rate was as high as 83%; cumulative sales exceeded 22 million smart TVs, and daily production of 100 billion TVs saw big data. The cumulative viewing time of users exceeds 5 billion hours.

The founder and CEO of American TV brand Vizio is a Chinese-American entrepreneur Wang Wei. He was born in Taiwan, China. He founded a display company named MAG Innovision before the establishment of VIZIO in the 1990s. In October 2002, Wang Wei founded Vizio, an American television company, in Irvine, California, USA, for US$600,000. In addition to producing televisions, Vizio's business also covers smartphones, laptops, desktops and other products.

In terms of brand, Vizio adopted "high-end products, parity strategies." From the date of its birth, Vizio's core value is to “provide 'cheap' luxury goods” to solve the contradiction between the potential demand for large-screen flat-screen TVs in the US and its high prices, and launch them in due course under this concept. A series of television "luxury goods" that can be consumed by the general public.

On the sales channels, Vizio started with membership stores such as Costco Wholesale and Sam's Club. This type of membership store usually uses high-end and low-end brand mashups. Strategy, which does not allow Vizio to quickly increase its brand image as Best Buy, but it also avoids falling into the ranks of low-end brands. After gaining a foothold in the U.S. market through large-scale retail stores, Vizio began to gradually expand its channels, infiltrating supermarkets such as Wal-Mart and specialty appliance stores such as Best Buy, and authorized online partners.

The Vizio-branded flat-panel TVs are all produced overseas. The two main foundries are Rui Xuan Technology and Foxconn in Taiwan. In addition to OEM production of all products, Vizio also conducts parity purchasing of flat panel TV parts worldwide, further reducing overall machine costs.

In July 2015, Vizio filed an application with the US Securities and Exchange Commission (SEC) and planned to raise $172.5 million through the initial public offering (IPO) listing, which was originally planned for listing this year.

According to the S1 document in October 2015, Vizio has more than 8,000 sales outlets in the United States, with total sales of television and audio products exceeding 70 million, including 10 million smart TV sales.

The submitted documents also show that in the ownership structure of Vizio, Wang Wei personally held 54.4% of the shares, and two foundries - Rui Xuan Technology of China Taiwan and Foxconn (Q-Run, a subsidiary of Foxconn) are the two largest Vizio companies. Institutional investors, hold 20% and 8%, respectively.

In fact, in mid-July 2016, there were many versions of the rumor that the Vizio company sold itself to the market. There have been media reports that companies that have shown strong interest in Vizio Inc. include Apple, Google, Ali and LeTV. At the time, rumors also mentioned that Apple’s offer price had reached US$3 billion, surpassing Ali’s previous US$2.5 billion bid, and LeTV’s earlier US$1.5 billion bid was at risk of going out.

What is the purpose and significance of the acquisition?

"When I first saw Wang Wei (the founder and CEO of Vizio) three years ago, I wanted to merge with them and struggled for three years," Jia Yueting revealed. Wang Wei also confirmed that Jia Yueting had met with Jia Yueting for the first time in Beijing more than three years ago. Jia Yueting made several requests for cooperation with him, but none of them agreed.

From the content of the speeches given by the two founders at the press conference, Jia Yueting locked in Vizio very early, and cooperation and acquisition have been deliberately planned for a long time. So, what is the full acquisition of Vizio for LeTV?

At the press conference, Jia Yueting gave the answer: “This acquisition is a deep-rooted antithesis based on both the concept and the vision. We bring to the U.S. users more than just L+V, but the Internet ecology. The model is brought here to create a free-flowing ecological life for users in the United States and the world."

LeTV believes that the acquisition initiated by Vizio will establish the company's globalization development path:

First, LeEco+Vizio will have more than 10 million smart TV installation bases each year. In three years, LeTV's large-screen ecology is expected to become the global TOP.3 brand, opening the journey to reconstruct the value chain of the global television industry;

Secondly, LeEco's big-screen ecology will cover the TV market of all screen sizes; besides, LeEco's mobile phones, cars, VR and Vizio tablet computers will cover all of people's life scenes. LeEco, LeEco will lead the global users into the screen reading era with the most "full screen" layout;

Third, the acquisition of Vizio will further strengthen LeEco's voice in the global television industry supply chain. Vizio has strong global supply chain management capabilities and has established long-term partnerships with US Tier 1 distributors. Therefore, successively taking shares in TCL Multimedia and acquiring Vizio, it helps LeEco gradually realize the vertical integration and value reconstruction of the global industry chain from the upstream industry chain of screen-core-intelligent terminals to downstream channels and marketing resources, and from brands to users; LeEco also Will use the "platform + content + terminal + application" ecological model to help Vizio upgrade to a multi-dimensional, open closed-loop shared ecosystem;

Fourth, through this acquisition, LeEco laid the foundation for the development of its global strategy. In addition to letting more global users know and understand the LeTV brand and its ecological model, the future LeEco will be “dissatisfied with 10 million people, tens of millions of people involved in R&D, 10 million people use, and 10 million people”. The concept of UP2U (User Planning To User) was introduced into Vizio to involve users from the United States and the world;

Fifthly, LeEco will help Vizio to open the era of ecological consumption in the United States and use the Internet as a foundation and link to break the boundaries of family, mobility, and travel life, and build a complete Internet lifestyle in the open ecological world through ecological value sharing—biological life.

In addition, Zheng Xiaoming, Senior Vice President of Levision Global Capital, pointed out that after the acquisition, LeEco's large-screen ecology platform will have more than 28 million smart TV channels, cumulative play time exceeds 11 billion hours, up to 730 million monthly live users , "It is worth noting that this number has exceeded the sum of the number of Twitter and Snapchat monthly active users."

For Vizio, the reason why William Wang, who co-operated with LeTV three years later, was given by the founder, Wang Wang: "I believe that Mr. Jia Yueting will not only help Vizio's future development in the United States. He Will lead it to the world."

In fact, even though Vizio's products are selling at a low price, they are trying to expand their product lines as the market is under greater pressure to compete. However, neither the tablet nor the smartphone nor the thin and light notebooks have achieved the market. success. In the process of its attempt to transform, due to the lack of a good liquidity model, the challenges are also increasing.

In addition, as Wang Wei mentioned, “Jia Yueting will lead Vizio to the world”, Vizio's current market is mainly in the United States, and there is almost no brand awareness overseas. If you choose to cooperate with LeTV, you may use the resources provided by the latter to enter more markets.

How will the follow-up cooperation plan be launched?

It is worth noting that the main entity of this acquisition is LeEco. According to the introduction, LeEco is a parallel company of Levision's main overseas company, with dual headquarters in China and North America. "It has a four-tier ecosystem of 'platform+content+terminal+applications' that spans the seven major ecosystems of the Internet and cloud, content, sports, big screens, mobile phones, automobiles, and internet finance, building a global open closed-loop sharing Ecosystem.” After the acquisition, LeEco will own 100% of Vizio and 49% of Insacape. The acquisition is expected to be completed within 6 months and the acquisition will be completed in cash.

Jia Yueting said in an interview with the media that the acquisition of funds mainly from two aspects, one is LeTV's own cash flow; Second, LeTV will also have some ecological partners to participate in the form of equity or debt.

"Because LeEco Global has not yet been fully funded, LeTV's philosophy is that it will not prematurely finance, over-dilution the team's equity, and will reserve more equity for our team members and partners. The world is now a relatively large enterprise, and growth is also very rapid.This year's sales are likely to be around 10 billion US dollars.So at the right time, we will also start the first round of global financing, which is the first round The additional issuance," said Jia Yueting.

Subsequently, Winston Cheng, senior vice president of LeSco Global Capital, introduced the transaction arrangement after the acquisition:

First, Vizio's brand is maintained and Vizio's corporate culture will remain unchanged;

Second, the Vizio management team will remain unchanged and continue to be responsible for the company's day-to-day management operations at its headquarters in Irvine, California. At the same time, in order to ensure the sustainable development and growth of the company, LeTV has confirmed with its management the performance incentive plan for the next three years;

Third, Vizio's customer service system in North America remains unchanged. “We plan to continue our business operations with the same input to provide consumers with maximum support.” Vizio's supplier partners remain unchanged. Prior to this, Vizio signed with all parties. The subject matter and clauses involved in the agreement will also remain unchanged;

Fourth, LeEco will provide content, technology, Internet and cloud services for Vizio. In the future, the entire LeTV ecosystem will be “inverted” with Vizio to help it transform and upgrade to an Internet ecosystem company. (Finish)