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Deal
Huawei Technologies Co Ltd is in talks with Digital China Group Co Ltd and other suitors to sell parts of its Honor smartphone unit in a deal that could fetch up to 25 billion yuan (US $ 3.7 billion), people with knowledge said. of the matter.
FILE PHOTO: Huawei’s new Honor 20 smartphone is seen at a product launch event in London, Britain on May 21, 2019. REUTERS / Peter Nicholls / File Photo
HONG KONG: Huawei Technologies Co Ltd is in talks with Digital China Group Co Ltd and other suitors to sell parts of its Honor smartphone unit in a deal that could fetch up to 25 billion yuan (US $ 3.7 billion), people with knowledge of the matter he said.
The beleaguered Huawei is resetting its priorities in the face of US sanctions and will focus on its high-end Huawei phones rather than the Honor brand, which is aimed at the young and budget conscious, they said.
Assets to be sold have yet to be finalized, but could include Honor’s brand, research and development capabilities and related supply chain management business, two of the people said.
The deal may be a cash sale and could end up being smaller, worth between 15 billion yuan and 25 billion yuan, one of the people said.
Digital China, the main distributor of Honor phones, has become the pioneer, but other potential buyers include Chinese electronics maker TCL and rival smartphone maker Xiaomi Corp, the people said.
The sources declined to be identified because the conversations were confidential.
Huawei and TCL declined to comment. Digital China and Xiaomi did not respond to requests for comment.
The Honor brand was established by Huawei in 2013, but the company mainly operates independently of its parent. It competes with Xiaomi, Oppo and Vivo in China’s highly competitive budget phone market, and its phones are also sold in Southeast Asia and Europe.
Kuo Ming-chi, an analyst at TF International Securities, has said that any sale by Huawei of the Honor smartphone business would be a win-win situation for the Honor brand, its suppliers, and China’s electronics industry.
“If Honor is independent of Huawei, its sourcing will no longer be subject to the US ban on Huawei. This will help Honor’s smartphone business and suppliers,” he wrote in a research note last week.
The budget phone industry operates on low margins and Honor set aside less than 5 billion yuan in net profit on revenue of about 70 to 80 billion yuan last year, one of the people said.
If it succeeds in its offering, Digital China, which is also partnering with Huawei in cloud computing and other businesses, plans to fund most of the deal with bank loans and is ready to secure financing in the coming weeks, the people said. .
Shares of Digital China, which is listed in Shenzhen, rose 6% in trading on Wednesday afternoon.
(US $ 1 = 6.7389 Chinese yuan)
(Report by Julie Zhu in Hong Kong; Additional Report by David Kirton in Shenzhen; Editing by Sumeet Chatterjee and Edwina Gibbs)
