By Georgia Wells, Katy Stech Ferek and Cara Lombardo
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (August 1, 2020).
Microsoft Corp. is in advanced talks to acquire the U.S.
operations of the Chinese-owned video app TikTok, according to
people with knowledge of the discussions, in a deal that would be a
concession to White House pressure and make the software giant a
major player in social media.
A sale to Microsoft, likely for billions of dollars, would be a
win for both TikTok and its parent company, Bytedance Ltd., where
executives had feared that the U.S. government would force device
makers to take TikTok out of their app stores, according to another
person familiar with the matter.
For the Trump administration, a sale of TikTok would also
eliminate potential legal challenges -- and public backlash -- that
could have occurred if the wildly popular app was forced off
millions of American smartphones.
A deal could be completed by Monday, according to people
familiar with the matter. The talks involve representatives from
Microsoft, Bytedance and the White House. Talks are fluid, and a
deal may not come together.
On his way back from Florida, President Trump told reporters on
Air Force One he wasn't in favor of a deal to let a U.S. company
buy TikTok's American operations.
"As far as TikTok is concerned we're banning them from the
United States, " Mr. Trump said. "Well, I have that authority. I
can do it with an executive order or that," he said referring to
emergency economic powers.
Bytedance had considered a broader range of options. However,
the White House pressured Bytedance to sell TikTok's U.S.
operations to an American company, one of the people said.
A valuation couldn't be learned. It could be tricky to put a
price tag on a business that is under pressure from governments
around the world but also growing rapidly.
News of the deal talks, earlier reported by Fox Business, came
as the U.S. was concluding a security review that was expected to
recommend that Bytedance sell TikTok.
U.S. officials have expressed concerns that TikTok could pass on
the data it collects from Americans to China's authoritarian
government. TikTok has said it would never do so.
In a statement posted online this week, TikTok CEO Kevin Mayer,
who was hired away from Walt Disney Co. earlier this year, said the
company was committed to transparency in how it collects and shares
data.
"TikTok has become the latest target, but we are not the enemy,"
he said.
A Microsoft spokesperson declined to comment.
For the Redmond, Wash., software giant, a TikTok deal would be
its splashiest acquisition since its 2016 purchase of LinkedIn for
more than $26 billion and would immediately make it a formidable
rival to social-media stalwarts Facebook Inc. and YouTube.
Facebook and YouTube parent Alphabet Inc. would have been likely
suitors in years past, but they are facing tough regulatory
scrutiny, including over whether their past acquisitions have
hindered competition.
TikTok, known for its catchy dancing and lip-syncing videos, has
soared in popularity this year amid the pandemic. About 315 million
users downloaded TikTok in the first quarter of the year, the most
downloads ever for an app in a single quarter, according to
research firm Sensor Tower, bringing its total to more than 2.2
billion globally.
The U.S. historically has accounted for about a 10th of TikTok
users. In addition to concerns that TikTok could collect data on
Americans, U.S. officials worry that the app could be used to
spread Chinese propaganda and that the platform's moderators could
be censoring content to appease Beijing.
The review of TikTok has centered on ByteDance's 2017
acquisition of a similar video-sharing platform called Musical.ly,
a Shanghai-based service that had built a strong U.S. user base.
After the acquisition, Musical.ly's platform was rebranded as
TikTok, and users who wanted to share videos could continue to do
so on TikTok's platform.
ByteDance, whose secondary shares have valued it at $150 billion
recently, counts big-name U.S. investors such as Coatue Management
and Sequoia Capital as backers.
The Committee on Foreign Investment in the U.S. began its probe
into TikTok last year, amid concerns from members of Congress and
others about the data it might be collecting.
In a statement Friday, Rep. Michael McCaul (R., Texas) welcomed
the possible separation of TikTok from Chinese ownership but said
"more must be done across the board to disentangle American
consumers from Chinese Communist Party-controlled technology and
apps."
"This isn't just about the CCP collecting data from unwitting
Americans on TikTok or similar apps; they also control the content
users see," Mr. McCaul said.
The U.S. has increasingly focused on deals that put U.S.
citizens and their privacy at risk, a focus that Congress ordered
in a 2018 law.
Under that law, regulators can investigate deals involving
foreign money if that business has access to data on more than one
million people, including certain genetic and biometric data,
financial data and health data. The rules also apply to investments
in U.S. businesses that track users' locations or target U.S.
military or national security personnel.
The Treasury-led foreign-investment committee is made up of
federal agencies and reviews deals involving foreign money to
ensure they don't put the country's national security at risk.
Earlier this year, Mr. Trump ordered another Chinese company to
sell its stake in a Maryland property-management software firm, a
platform that hotels and casinos use to enable guests to check into
rooms using smartphones. That order marked the sixth time a U.S.
president has either blocked a deal or ordered a corporate selloff
since Congress authorized the power to intervene in 1988.
At a congressional hearing this week on the market power of big
tech companies, Facebook Chief Executive Mark Zuckerberg made it
clear that he intends to address threats from China -- a
not-so-veiled reference to TikTok's rise.
Mr. Mayer, TikTok's CEO, fired back in a blog post Wednesday
morning, disparaging Facebook's "copycat" efforts to match TikTok
and saying many attacks on the company are "disguised as
patriotism."
Kate Davidson and Alex Leary contributed to this article.
Write to Georgia Wells at Georgia.Wells@wsj.com, Katy Stech
Ferek at katherine.stech@wsj.com and Cara Lombardo at
cara.lombardo@wsj.com
(END) Dow Jones Newswires
August 01, 2020 02:47 ET (06:47 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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