Beijing-based Xiaomi Corp has entered into an agreement to invest about $102.84 million in Zimi, a Chinese maker of Internet of Things (IoT)-based hardware and mobile accessories, as the smartphone maker aims to boost its 5G and IoT capabilities.
According to a filing with the Hong Kong Stock Exchange on Thursday, Xiaomi plans to acquire an additional 27.44 per cent stake in Zimi to boost its holdings to 49.91 per cent.
Xiaomi will fork out about $25.78 million in cash and pay the rest in shares for the deal.
The sellers include Zimi’s senior management and employees as well as investment firm Zifone Holdings Limited, shows the filing.
Zimi’s power-related technology can be applied to Xiaomi-branded smartphones and other IoT products “for higher competitiveness, standardization of power-supply of our products to reach cost-saving,” said Xiaomi.
The company added that Zimi’s R&D capability, industry resources, and operating experience in power-related products, camera, speakers and other products will “facilitate and improve the competitiveness of the company’s future ecosystem products.”
The planned investment comes as Xiaomi is ramping up efforts to lift its technological strengths and expand offerings by investing in smaller players to build an ecosystem.
The company has invested in over 300 companies with an aggregate book value of 32.3 billion yuan ($4.53 billion) as of March 31, 2020. This represents a year-over-year (YOY) growth of 11.4 per cent, according to its earnings for the first quarter of 2020.
In late February, Roborock, a Xiaomi-backed firm that develops smart vacuum cleaners, raised 4.5 billion yuan ($649 million) in an initial public offering (IPO) on Shanghai’s Nasdaq-style STAR Market. Kingsoft Cloud, another firm backed by Xiaomi, floated shares on the Nasdaq Stock Exchange in early May following a $510 million IPO.
Xiaomi, founded in April 2010 and listed on the Main Board of the HKEX in July 2018, is the world’s fourth-largest smartphone brand that delivers products to over 90 countries and regions.
Apart from directly making investments through the venture, the company founder Lei Jun also co-founded Chinese venture capital firm Shunwei Capital with Tuck Lye Koh. The VC firm has a portfolio of about 400 companies, including 22 unicorns. It expects four IPOs of portfolio companies in 2020.
Chinese business data tracker Tianyancha shows that Xiaomi and Shunwei Capital injected capital into Zimi’s Series A round in 2014. Financial terms of the round remained undisclosed.