Huawei to sell phone unit for $15 bln to Shenzhen gov’t, Digital China, others: sources

  • to announce all-cash sale as early as Sunday -source
  • Digital China to be top-two shareholder with nearly 15% -sources
  • Divestment could spare from U.S. sanctions -analysts
  • Honor aims to go public within three years -sources

HONG KONG: Huawei plans to sell budget-brand Honor in a 100 billion yuan ($15.2 billion) deal to a consortium led by handset distributor Digital China and the government of its home town of Shenzhen, people with knowledge of the matter told Reuters.

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 – to focus on high-end handsets and corporate-oriented , the people said.

It also indicates little expectation for any swift change in the U.S. perception of Huawei as a security risk following a new U.S. administration, one of the people said.

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.

Main Honor distributor Digital China Group Co Ltd will become a top-two shareholder of sold-off entity Honor Terminal Co Ltd with a near-15% stake, said two of the people. Honor Terminal was incorporated in April and is fully owned by Huawei, the corporate registry showed.

Digital China, which also partners Huawei in businesses such as cloud computing, plans to the bulk of the deal with bank loans, the two people said. It will be joined by at least three investment firms backed by the government of financial and technology hub Shenzhen, with each owning 10% to 15%, they 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, and the Shenzhen government did not respond to requests for comment.

Digital China – which did not respond to request for comment on Tuesday – in a stock exchange filing on Wednesday said it had not reached any agreement with Huawei about the Honor brand to date.

“It seems to be a drastic move given the Honor brand has been highly complementary to Huawei’s smartphone portfolio,” said Nicole Peng, mobility vice president at researcher Canalys.

“The interesting synergy with potential buyers actually can be Honor’s IoT (Internet of Things) business.”

Honor is one of several brands seeking growth by turning phones into controlle

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