Last year LeEco had announced its interest to purchase the U S established TV maker Vizio for about $2 billion. The deal didn’t go through and came apart in the following March. LeEco’s reason to pull out was a variety of problems including severe cash crunch. However, now Vizio has fired back with an allegation on LeEco for $100 million buyer-termination fee. Moreover, Vizio has moved a lawsuit against LeEco in the California court to receive its rightful $100 million dollar payment.
Vizio alleges that LeEco by not going through the buyout promised for an alternate plan. According to it, LeEco was to let Vizio set up a joint distribution deal with the Chinese company. This would include paying an initial sum of $40 million. Moreover, $10 million once the deal closes and the remaining sum to be set aside as capital contribution for the joint venture. However, Vizio now claims that LeEco never planned to pay $100 million and proposed this deal to reduce its liability by 60%.
The deal was not straight forward from the start with many hiccups in its way. The deal was sure to attract a lot of mayhem. Moreover, it seems that Vizio is now poised to use LeEco’s current situation for its own benefit.
The lawsuit directly blames the CEO of LeEco, SVP of finance and the director of LeEco as the people who mislead Vizio executives into this deal. They allege that LeEco operators knew that they didn’t have the financial firmness to go through this deal. Vizio goes on to allege that LeEco told them that this deal was important and they needed it to establish their financial stability, credibility and resources.
It is confident that LeEco marked this deal as a genuine effort to get access to Vizio’s confidential customer base. Moreover, to generate a buzz about the merger and take all the limelight in its favour. The firm listed out the benefit that LeEco would gain. These are confidential customer data, account history, contract terms, contact information of customers, and purchasing needs.
This case has come out after the Shanghai court took action on $180 million assets of CEO of LeEco company by freezing it. Moreover, putting his wife and affiliates under suspicion as well with fraudulent wealth accumulation charges. LeEco is not even able to pay its employees until 10th of August.
How all of the drama with this Chinese firm ends will only be clear with the passage of time. LeEco who cannot pay its employees doesn’t seem to be able to pay $100 million anytime soon either.