Huawei decided to Sell $15-Billion Honor Unit to Digital China Government company

Huaweis

The all-cash sale will include almost all assets including brand, research & development capabilities, and supply chain management, the people said. Huawei could announce it as early as Sunday, one of the people said. After the sale, Honor plans to retain most of its management team and 7,000-plus workforce and go public within three years, the people said, declining to be identified due to confidentiality constraints. Honor declined to comment. Huawei, Digital China, and the Shenzhen government did not immediately respond to requests for comment.

This report also arrives amid the US Presidency, which has had a change in leadership. Although, Huawei is clearly not hoping for any imminent changes in policy that would be favorable to its position. In other words, the security risk allegations might still persist despite Joe Biden taking over. The transaction is said to be “all cash” and will include almost every asset, branding, research and development capabilities, and even supply chain management as well.

Honor-brand smartphones made up 26 percent of the 51.7 million handsets Huawei shipped in July-September, showed estimates from researcher Canalys. Honor's products also include laptops, tablet computers, smart TVs, and electronic accessories. It also indicates little expectation for any swift change in the US perception of Huawei as a security risk following a change in US administration, one of the people said.

Reasons?

The US government last year moved to prevent most US companies from conducting business with Huawei, also the world's biggest telecoms equipment vendor, citing national security concerns. Huawei has repeatedly denied being a security risk.

Decisions

  • Main Honor distributor Digital China will become a top-two shareholder of sold-off entity Honor Terminal with a near-15 percent stake, said two of the people. Honor Terminal was incorporated in April and is fully owned by Huawei, the corporate registry showed.
  • After the deal goes through, Honor still plans on retaining most of its management and over 7,000 employees and workforce. Furthermore, it plans on going public within the next three years as per a source.
  • At the moment, Honor has declined from commenting on the matter, while Huawei, Digital China, and the Shenzhen government have yet to respond on the matter.

Conclusions

It will be joined by at least three investment firms backed by the government of financial and technology hub Shenzhen, with each owning 10 percent to 15 percent, they said. The transaction will have Digital China finance the bulk of the deal through bank loans, which will further be supplemented by at least three investment firms that are backed by the government of financial technology hub Shenzhen. These firms would each hold about 10 to 15 percent of the shares.