May 22, 2017 / 7:10 AM / 2 months ago

China's LeEco founder cedes control of listed unit amid cash crunch

3 Min Read

Jia Yueting, co-founder and head of Le Holdings Co Ltd, also known as LeEco and formerly as LeTV, poses for a photo in front of a logo of his company after a Reuters interview at LeEco headquarters in Beijing, China, picture taken April 22, 2016.Jason Lee/Files

HONG KONG/BEIJING (Reuters) - The founder of LeEco, a Chinese Netflix-to-Tesla-like conglomerate, has stepped down as the CEO of the group's main listed unit, as the company begins to streamline and cut debt after rapid expansion led to a cash crunch.

Jia Yueting, who will remain as chairman and CEO of LeEco, envisions the group maintaining its separate unlisted automotive unit but rolling all other areas of business into Leshi Internet Information & Technology Corp Beijing, according to a transcript of his remarks to journalists on Sunday.

The firm has also trimmed loans by nearly half from a peak of 10 billion yuan ($1.45 billion), Jia said.

Shenzhen-listed Leshi said in a stock exchange filing that Liang Jun, a long-time Lenovo Group Ltd executive who joined Leshi in 2012, will replace Jia as chief executive officer. Leshi's finance chief Yang Linjie, who resigned for personal reasons, will also be replaced by Zhang Wei.

The restructuring comes several months after the group received a much-needed $2.2 billion investment from property developer Sunac China Holdings Ltd.

Sunac said the management change is not an attempt to take more control of Leshi, considered one of LeEco's healthiest assets. But it marks a push to bolster the streaming business' operations.

"There is no such thing as a fight for control," said Liu Shuqing, a Sunac-appointed director on the board of Leshi, according to the transcript of Leshi's Sunday briefing.

In a letter to all LeEco staff seen by Reuters, Jia called the two appointments as Leshi's "most important milestone since its IPO in 2010", and said they were aimed at improving the listed company's performance.

Jia said in the letter his personal focus over the past two years on LeEco's non-listed businesses, which include consumer electronics and cars, had dragged down Leshi's development.

"I had expressed my apologies and gratitude to investors at the end of last year and promised to refocus on our listed businesses," Jia said in the letter.

"After we introduced the second-largest and strategic shareholder (Sunac), we formally initiated a major restructuring of Leshi."

Jia, who is continuing as chairman of Leshi, said he will "focus on the governance, strategic planning and core product innovation" of LeEco's listed units.

LeEco began with a Netflix-like video streaming service and expanded into an array of products and services. The group has been fighting a cash crunch since last year that Jia said was the result of that aggressive growth.

($1 = 6.8906 Chinese yuan renminbi)

Reporting by Sijia Jiang, Jake Spring and Hallie Gu; Editing by Sam Holmes and Christopher Cushing

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