Chinese LED manufacturer Lianovation filed a suit against Hanen Digital Interconnect Culture (Hanen Digital) for not returning earnest money after the two organizations canceled an acquisition deal, reported Chinese-language media Sinai.

Liantronics stated it shelled out RMB 10 million (US $ 1.45 million) as earnest payment to Hanen Digital to move forward with the acquisition transaction, but after the two companies called off the deal the latter company did not return the payment as complied by contract. Liantronics filed a complaint against Hanen Digital in Jiangxi Nanchang Intermediate People's Court, which is being processed by the court.

Liantronics is taking legal action to protect its company and shareholder rights, and will organize a briefing for debtors. If the court’s verdict proves Hanen Digital failed to comply with the contract terms, Liantronics will evaluate the possibilities of retrieving the payment, and will consider listing it under bad debts. In addition to the above conditions, the company will terminate restructuring its assets as part of the acquisition process, which will not have much impact on its operations.

The company operations were not affected, and it did not release any further information. As of Sept. 30, 2016, the company’s revenue reached RMB 1.83 billion, and listed company’s net profits for shareholders amounted to RMB 156 million.

Back in May this year, Liantronics announced it will be acquire 65% stake in the internet company Hanen Digital for about RMB 468 million. During the time period the company announced it would halt financing RMB 851 million through private placement for fiscal year of 2015, and start restructuring its assets.

If the acquisition fell through, Hanen Digital would become a subsidiary of Liantronics. The Chinese LED company was aiming to absorb multimedia, digital display, and mobile R&D operations into its LED and cable businesses to diversify its developments.

At a board meeting on Oct. 10, 2016, the company approved terminating the asset restructure plan, and halted the acquisition of Hanen Digital.

The acquisition was canceled on Sept. 23, 2016, Liantronics stated changes in the capital market policy, operation environment, and the two companies inability to arrive to an agreement on the takeover conditions caused many uncertainties that led to the termination of the acquisition. Liantronics further explained on Oct. 12, 2016 that the deal was terminated because “some government monitoring process of multidisciplinary asset restructure was becoming more stringent. Moreover, the two companies did not agree on Nanjing Hanen Digital restructure, future product development, and transaction value. The companies were not in agreement on the needed adjustments.”