- Honor will be transferred to Digital Group Co. Ltd.
- It will be an all-cash sale, Honor will retain its 7,000 strong staff
- The deal could be a result of the U.S.’s sanctions on Huawei
- Honor plans to go public within three years of the deal
Chinese firm Huawei is ready to sell Honor. It is an attempt to offload their affordable-focused smartphone sub-brand. Huawei is selling it to a government-backed consortium. The deal is signed at a staggering $15 billion or 100 billion yuan.
Huawei will transfer all Honor branding, R&D, supply chain, and personnel according to the deal. The government-backed group is the Shenzhen-based Digital Group Ltd. The firm is a current partner of Huawei. They are working on cloud computing applications.
The transfer of Honor
The deal confirmed an all-cash sale. It will include almost all assets. The $15 billion fee includes some 7,000 Honor staff. The deal is expected to be closed as soon as by this Sunday.
Although it is still unclear whether the change in ownership will allow Honor to access the much-desired Google Mobile Services. These services are essential in the western markets, where Honor is sold. Currently, Honor faces all the sanctions that its parent company, Huawei, is struck with. It is not clear how Honor will cope as a separate entity. The doubts arise as there is no substantial financial backing for it. Neither does it have the marketing capabilities of its present owner.
Honor shipped over 50 million smartphones in July-September 2020. These accounted for 26% of the sales. The US’s restrictions on Huawei Technologies Co.Ltd. could have been a driving force behind this deal. It is also a subtle indication of little expectation for any change in the US’s perception of Huawei. It is still considered to be a security threat to the new US administration.
Post-deal, Honor’s distributor Digital China Group Co. Ltd., will be one of the top shareholders. It will hold a nearly 15% stake in the sold-off entity, Honor Terminal Co. Ltd. The Digital China Group plans to finance a majority of the deal with bank loans. It will be joined by at least three investment firms. These firms will be backed by the government of financial and technology hub Shenzhen. Both of these owe a 10% to 15% share.
Honor is also planning to go public within three years of its sale. It is seeking growth by turning smartphones into controllers of internet-connected devices. These can be home appliances or other Internet-of-Things (IoT) applications.
