Honor Brand Can Be Sold To Chinese Govt, Private Firm For Rs 1.1 Lakh Crore; But Why?
Huawei is planning to sell its smartphone brand unit Honor for as much as 100 billion Yuan to the local government of Shenzen. The deal involves the Digital China Group as well.
We all know about the US government’s decision to ban Huawei and cut off its supply of Google Android because of the company’s involvement in alleged illicit activities.
Read on to find out why Huawei has decided to sell off Honor right here!
Huawei To Sell Off Its Sub-Brand Honor: But Why?
Honor is a sub brand of Huawei and was set up in 2013. There has also been news about Huawei selling off the subsidiary in order to continue operations without the sanctions.
The company has sold off its sub-brand so that certain services will be available for the smartphones manufactured by Honor, such as Snapdragon chipsets, Google Android, and all of Google’s Mobile Services as well. The current US sanctions have been levied only on Huawei Consumer Business Group and Huawei Enterprise.
The report states, “The plan comes as U.S. restrictions on supplying Huawei Technologies Co Ltd force the world’s second-biggest smartphone maker – after South Korea’s Samsung Electronics Co Ltd 005930.KS – to focus on high-end handsets and corporate-oriented business.”
The Honor brand will be sold by Huawei for 100 billion Yuan (roughly 15.2 billion US Dollars) to the Digital China Group, and the local government of the home town of Honor, Shenzhen.
Deal To Happen Despite US Elections; Will Honor Keep Its 7000+ Staff?
There also is a possibility that now that the presidency of the US has changed, there would be changes in the rules. However, Huawei is not expecting any immediate changes in the policy. This also means that the company is not expecting the security allegations to go away so soon.
As per reports, the transaction is all cash and will include almost every asset of the company. Branding, research and development capabilities, and supply chain management is also expected to be included in this transaction.
Reports have revealed that the Digital China Group will be among the top 2 shareholders of Honor with a 15% stake in Honor Terminal Co Ltd. The Digital China group will be financing the bulk of the deal with the help of bank loans and at least three investment firms that are supported by the government of financial technology hub Shenzhen. All the investment firms would be the owners of about 10 to 15% of the shares.
After the sale Honor will retain most of its management team and a workforce of more than 7000 people. The company is also expected to go public within 3 years.