By Reuters
A potential shotgun wedding to Microsoft Corp for TikTok’s U.S.
operations provoked an outcry on
Chinese social media as well as
criticism from a prominent Chinese investor in TikTok owner ByteDance.
The US tech giant formally declared its interest on Sunday after
President Donald Trump, who has cited national security risks posed by
the Chinese-owned short video app, reversed course on a planned ban and
gave the two firms 45 days to come to a deal.
The proposed acquisition of parts of TikTok, which boasts 100 million
U.S. users, would offer Microsoft a rare opportunity to become a major
competitor to social media giants such as Facebook Inc and Snap Inc.
Microsoft which owns the social media network LinkedIn for professional
workers, is also seeking to buy TikTok’s Canadian, Australian and New
Zealand interests.
ByteDance has not publicly confirmed the sale talks. But in an internal
letter to staff on Monday seen by Reuters, the company’s founder and CEO
Zhang Yiming said the firm had started talks with a tech company it did
not identify to clear the way “for us to continue offering the TikTok
app in the U.S.”
But clinching a deal - potentially worth billions of dollars and a
lightning rod for crumbling U.S-China relations - that will satisfy all
parties will be a tall order.
“A forced deal under Washington’s shotgun could open up for endless
litigations if it should result (in) an unfavorable outcome to existing
private shareholders,” said Fred Hu, chairman of Primavera Capital
Group, an investor in ByteDance and one of China’s best known private
equity groups.
Hu said Microsoft was a credible buyer but questioned how selling large
parts of TikTok’s operations at such an early stage of its growth could
ever be a good deal for ByteDance.
“It absolutely makes no sense. Bytedance is an innocent victim of the
mad politics and mad geopolitics. It is a sad outcome for Bytedance, for
entrepreneurial capitalism, and for the future of global commerce,” he
said.
Tech bankers in Asia said investment banks working on the deal would have to be careful not to antagonize Trump.
“This is not a standard M&A situation...this is hard to predict,”
said one senior banker with a U.S bank in Hong Kong, saying that it
would be a question of how to structure a deal in a way that would keep
Washington happy.
Zhang’s letter to staff also said ByteDance did not agree with the
stance taken by the Committee on Foreign Investment in the United States
(CFIUS), which scrutinizes deals for national security risks, that it
must fully divest TikTok’s U.S. operations.
“We disagree with this CFIUS conclusion,” the letter said but added:
“...we understand the decision in the current macro environment.”
ByteDance did not respond to
Reuters requests for comment.
The Chinese government declined to comment specifically on the Washington’s move to force a sale of TikTok’s US operations.
The United States has been “stretching the concept of national
security”, presuming that companies are guilty without evidence, China’s
foreign ministry spokesman Wang Wenbin told a briefing after being
asked about U.S. actions against Chinese software companies.
The topic “ByteDance has agreed to divest TikTok’s US operations” was
one of the most discussed subjects on China’s Twitter-like Weibo
platform on Monday, with over 920 million views.
Some commentators criticized ByteDance, saying it has not shown as much
backbone as Huawei Technologies, also in the crosshairs of U.S.-China
tensions and now on a US trade blacklist.
“(ByteDance) kneeled down so fast that it didn’t even wait for the
Chinese government to retaliate,” said one comment that was ‘liked’ over
5,000 times.
While TikTok is ByteDance’s most well-known app globally, the company
makes the bulk of its revenue from advertising on Chinese apps including
Douyin - a Chinese version of TikTok - and news aggregator app Jinri
Toutiao.
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