Huawei to sell smartphone unit for $15 billion

HONG KONG: Huawei plans to sell budget-brand smartphone unit 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 force the world’s second-biggest smartphone maker – after South Korea’s Samsung- to focus on high-end handsets and corporate-oriented business, 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 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 finance 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, Digital China and the Shenzhen government did not immediately respond to requests for comment.