Last summer LeEco announced it intended to purchase the U.S.-based TV maker Vizio for $2 billion. The deal fell through in March amid myriad problems surrounding LeEco, including a major cash crunch. Allegedly the deal included a $100 million buyer-termination fee and now Vizio has filed suit in a California court to collect payment.
Vizio claims that in lieu of paying Vizio the fee, the Chinese company offered to set up a joint distribution deal, which would have included paying Vizio $40 million up front, $10 million after the new deal closed with the remaining $50 million turned into a capital contribution for the joint venture. Yet Vizio alleges that LeEco never intended to pay the entire $100 million and purposed the deal in an effort to reduce its liability by 60 percent.
And Vizio sounds like it’s onto something. The deal sounds shady from the start.
The lawsuit alleges that LeEco’s CEO, SVP of Finance and a director of LeEco’s holding company mislead Vizio executives on the health of LeEco’s holding company — the entity actually trying to purchase Vizio. It goes on to say that these executives, in person, over the phone and through email, mischaracterized the company’s financials, saying that LeEco needed to complete this merger to “either obtain the instant financial stability, credibility and resources.”
The lawsuit goes on to state Vizio believes LeEco was going to “use [the] publicly announced intended merger with VIZIO to gain or try to obtain access to VIZIO’s large corporate customers and key decision makers thereat for their own purposes and by means of confidential customer information that had been developed … and provide LeEco with access to VIZIO’s confidential customer information, including contact information, account history, purchasing needs or requirements, contract terms, and the like.”
This comes days after a Shanghai court froze $180 million in assets belong to the LeEco founder and former CEO, his wife and three LeEco affiliates. Yesterday Faraday Future, which lists LeEco as a major financial backer, announced it was not going to build a factory in the Nevada desert that would have cost $1 billion. News also broke earlier today that LeEco would not be paying some of its workers in China until August 10th.