On December 6, Hon Hai announced that its subsidiaries had sold all the shares of Vizio, a smart TV brand, to Wal Mart, an American retail giant, with a total transaction amount of US $50.704949 million (about 370 million yuan).
The reporter from Nandu Bay Finance Agency learned that on December 4, Wal Mart announced that it had successfully completed the acquisition of Vizio. Wal Mart completed its wholly-owned acquisition of Vizio at a price of $11.5 per share, totaling about $2.3 billion. The transaction amount was consistent with the plan announced at the beginning of February this year.
According to public information, Vizio was founded in 2002 and its main business is to sell cost-effective smart TVs and smart TV systems. It also includes selling its own advertising space to brand owners, which is the ads that users will see when opening Vizio TVs and using free audio and video services. In 2021, the company was listed on the New York Stock Exchange with the stock code VZIO.
Public information shows that Taiwanese manufacturers such as Foxconn, Foxconn, and Innolux are all shareholders of Vizio. For example, Foxconn made a reinvestment through a subsidiary in June 2018, with a total amount of $24.9999 million, thereby acquiring approximately 3.1% of Vizio's common stock.
Vizio once defeated well-known brands such as Samsung and Sony to ascend to the top spot in the North American market. According to market research firm Ovum, Vizio will rank ninth in the global TV market with a shipment volume of 4.8 million units in 2023, and currently holds a market share of approximately 12% -15%, ranking third in North America.
Previously, LeEco had a scandal with Vizio. In July 2016, LeEco announced that it would acquire Vizio for $2 billion to enter the US market. But in April 2017, LeEco suddenly announced its abandonment of the acquisition, and Vizio sued it, claiming that LeEco hoped to create a false impression of financial health and active business expansion through the acquisition of Vizio, and attempted to induce Vizio to provide confidential customer information. In addition, the contract between the two parties had agreed on a termination fee of $100 million, but after the acquisition failed, Vizio only received $40 million. The lawsuit was later settled by the two companies in November 2018 on undisclosed terms.
In February this year, it was reported that Wal Mart was negotiating to acquire Vizio. At that time, the revealed acquisition price was about 2 billion US dollars (approximately 14.387 billion yuan).
After Wal Mart reported the acquisition, Vizio shareholders chose to sell their shares to "cash out". Ruixuan announced in August that it will gradually sell 700000 shares of Vizio stock and will sell all of them in the future. Hon Hai announced that the purpose of its subsidiary Foxconn Assembly Holding Corporation's disposal is to achieve investment benefits. According to the cost of acquisition calculation, the realized benefits amounted to 26.934861 million US dollars, which will be included in the undistributed earnings for this year. According to International Financial Reporting Standard 9 (IFRS 9), $10.18181 million was reclassified from other equity in 2023, and $16.75468 million was reclassified as other comprehensive income for the current year.
According to public information, Wal Mart has always been Vizio's largest customer. According to Omdia's data, in the third quarter of 2023, Samsung's market share in the North American color TV market was 22.5%, while Hisense (including Toshiba) and TCL's market share were 13.3% and 12.4%, respectively.
Some insiders pointed out that Wal Mart's own TV brand Onn and Vizio's smart TV both compete in the middle and low end markets. If the acquisition is successful, the two TV brands are expected to integrate resources to occupy a larger market share, bringing new challenges to Chinese TV manufacturers Hisense and TCL, which occupy important positions in the middle and low end markets of color TV in North America, and may also catch up with Samsung in market share.
However, according to insiders, "the focus of this acquisition is not to obtain hardware, but to obtain access to the operating system of Vizio Smart TV, which stores valuable viewing data and advertising locations." By acquiring Vizio, Wal Mart has a chance to control 20% to 30% of the U.S. color TV market, increase the sales of its own brand from 5 million to nearly 10 million each year, increase the advertising revenue of TV operations, and help Wal Mart and e-commerce leader Amazon compete in advertising business.
At present, the competition in the North American TV market is shifting towards the advertising business of smart TVs. As more and more people reduce their cable TV subscriptions and switch to streaming, CTV (all ads displayed on TV screens, including those on smart TVs or various streaming services) is becoming an important component of the advertising ecosystem.
The report of Omdia, a data agency, shows that the penetration rate of so-called smart TV with access to streaming media content from the open Internet in the basic inventory of global annual shipments has exceeded 93% by the end of 2023, including the number of operable smart TV stocks. By the end of 2023, the number of smart TVs that can be operated globally will be close to 1.3 billion. Compared to the global online video advertising revenue of $200 billion, the revenue scale of smart TV advertising is $32.9 billion, accounting for 16%. Among them, the revenue of the Free Streaming Service Channel (FAST) was 6.2 billion US dollars. If 2023 is used as a reference benchmark, the average advertising revenue created by each smart TV will reach $26 per year.
In terms of regional distribution of global smart TV advertising revenue, North America's revenue reached 24.6 billion US dollars, accounting for nearly 75%. As a result, North America has become the main battlefield for smart TV operations, and various forms of commercial alliances have developed between streaming content, operating systems, brands, and channels. Omdia said that with the acquisition of Vizio CastOS by Wal Mart, the alliance between them will continue to evolve in the future.