ByteDance to drop TikTok’s US sale, opt for partnership with Oracle

0

Bytedance would not be selling TikTok’s US operations to Microsoft.

WASHINGTON (REUTERS, BLOOMBERG) – ByteDance abandoned the sale of TikTok in the United States on Sunday in pursuit of a partnership with Oracle Corp that it hopes will spare it a US ban while appeasing China’s government, people familiar with the matter told Reuters.

The Beijing-based company had been in talks to divest TikTok’s US business to either Oracle or a consortium led by Microsoft Corp after US President Donald Trump ordered the sale last month and threatened to shut down the popular short-video app in the United States.

The sale negotiations were upended by China updating its export control rules late last month that gave it a say over the transfer of TikTok’s algorithm to a foreign buyer.

Reuters reported last week that the Chinese government would rather shut TikTok down in the United States than let it be part of a forced sale.

Under the proposed deal, Oracle will be ByteDance’s technology partner and will assume management of TikTok’s US user data, the sources said.

Oracle is also negotiating taking a stake in TikTok’s US operations, the sources added.

Some of ByteDance’s top backers, including investment firms General Atlantic and Sequoia, will also be given minority stakes in TikTok’s US operations under the proposed deal, one of the sources said.

It is unclear whether Trump, who wants a US technology company to own most of TikTok in the United States, will approve the proposed deal.

The Committee on Foreign Investment in the United States (CFIUS), a US government panel which reviews deals for potential national security risks, is overseeing the talks between ByteDance and Oracle.

ByteDance plans to argue that CFIUS’ approval two years ago of China Oceanwide Holdings Group’s purchase of US insurer Genworth Financial offers a precedent for the deal structure it is proposing with Oracle, the sources said.

In that deal, China Oceanwide agreed to use a US-based, third-party service provider to manage the data of Genworth’s US policy holders.

ByteDance will argue a similar arrangement can safeguard the data of TikTok’s US users, the sources said.

ByteDance and Oracle did not immediately respond to requests for comment. The White House declined to comment.

Oracle’s chairman Larry Ellison is one of the technology world’s few supporters of Trump. The firm has significant technological prowess in handling data, but no experience in social media.

Its clientele comprises companies, rather than consumers.

Insiders had earlier revealed that Oracle Corp was the winning bidder for a deal with TikTok’s US operations after main rival Microsoft Corp said its offer for the video app was rejected.

ByteDance Ltd, TikTok’s parent, rejected Microsoft’s previous bid to buy TikTok’s US operations.

A deal with Oracle is narrower, appearing more like a corporate restructuring than an outright sale, a person familiar with the negotiations told Bloomberg.

Early offers from both parties valued the US business at about US$25 billion (S$34 billion), but that was before Chinese officials weighed in with new rules imposing limits on technology exports, and the terms may have also changed, the people said, asking not to be identified as the information isn’t public.

Microsoft, which was working with Walmart Inc, had been seen as the more likely winner earlier in the process, but its talks have cooled, a person with knowledge of the matter said earlier today. 

“ByteDance let us know today they would not be selling TikTok’s US operations to Microsoft,” Redmond, Washington-based Microsoft said.

“We are confident our proposal would have been good for TikTok’s users, while protecting national security interests.” 

The terms being discussed with Oracle are still evolving, one of the people said.

For example, Oracle could take a stake of a newly formed US business while serving as TikTok’s US technology partner and housing TikTok’s data in Oracle’s cloud servers.

Talk of a corporate restructuring harkens back to Bytedance’s original intentions earlier in the summer to sell a partial stake in TikTok’s operations or restructure the company with a global headquarters and board of directors outside of China.

One person familiar with the deliberations in the White House said it’s unclear whether a deal with Oracle will pass muster with the Trump administration, where various factions have been pushing for a complete shutdown or an outright sale of TikTok to an American company.

Dow Jones reported earlier that Oracle is set to be named TikTok’s “trusted tech partner” in the US.

TikTok was fielding bids for its US operations under orders by the Trump administration, which has said the company’s Chinese ownership threatens national security.

TikTok intends to bring a proposal to the White House ahead of a mid-September deadline imposed by US President Donald Trump, a person with knowledge of the matter said, and any bid will also need the blessing of government officials in Beijing.

Owning TikTok would have given Microsoft access to an addictive video-sharing app used by more than 100 million people in the US.

The site, which lets people record and edit short video clips ranging from lighthearted lipsyncs to more serious political statements, has gained popularity during the global pandemic that’s kept many people cooped up indoors.

Microsoft was the early front-runner for the acquisition, having started talks with ByteDance weeks before Trump’s executive orders and believing it had the preliminary framework of a deal the US government could back.

But events have been moving away from the software giant in recent weeks.

 

 

Oracle, a company with a closer relationship to the US president, emerged as a bidder with the backing of Sequoia Capital, a key ByteDance shareholder.

For Oracle, TikTok is a less obvious fit, but makes sense in light of the software company’s desire to build up its cloud-computing and consumer-data businesses. 

TikTok stores massive amounts of data and currently is a large customer of cloud services of Amazon Web Services and Alphabet’s Google. 

A partnership with TikTok also resonates with Mr Ellison’s cheer-leading for American tech interests.

 

 

Shortly after bids were submitted, the Chinese government announced a plan to be closely involved in approval of any deal and opposition to exporting key algorithms needed in the sale, one of the people said. 

ByteDance appeared eager for a more limited sort of agreement than Microsoft wanted, where it would retain more control, one of the people said.

Source

Leave A Reply

Your email address will not be published.