Huawei To Sell Honor Division To Shenzhen Government And Digital China Says Report

A report is making the rounds that claims smartphone manufacturer Huawei plans to sell its budget smartphone unit called Honor to a consortium known as Digital China and the government of Shenzhen. Huawei is based in the town of Shenzhen. The deal, according to people claiming knowledge of the negotiations, is worth 100 billion yuan (about $15.2 billion).

Digital China is a smartphone distributor operating in the Chinese market. According to the sources cited by Reuters, Huawei's move comes as US restrictions on the smartphone maker, the second largest in the world, forced it to focus on high-end devices and corporate business. According to the sources, selling off its budget arm also shows that Huawei doesn't expect anything to change in the near future, with perceptions in the US that it is a security risk despite the coming change in the presidential administration.

Honor's sale is reportedly an all-cash deal and includes most assets, including the brand, R&D capabilities, and supply chain management. Sources claim that Huawei could announce the deal as early as Sunday. Digital China is the leading distributor of Honor handsets and will become one of the two top shareholders of Honor Terminal Co Ltd with approximately a 15 percent stake.

Digital China will finance the deal through bank loans and is joined by at least three investment firms backed by the Shenzhen government. Sources claim that each will own between 10 and 15 percent of the entity once the sale is complete. Honor will keep most of its management team and its over 7000 strong workforce.

Sources also claim that the company intends to go public within three years. No official comments on the sale have been made by any of the companies involved.