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NEW YORK: ByteDance Founder and CEO Yiming Zhang’s decision to abandon his pursuit of the sale of TikTok’s US operations to Microsoft in favor of a partnership with Oracle was the culmination of weeks of pressure for part of the Chinese government and investors in the Beijing-based company, according to people familiar with the deliberations.
China’s opposition to a forced sale of TikTok, as well as concerns from major ByteDance backers like Sequoia and General Atlantic over the financial impact of selling the popular short video app in the United States for less than it’s worth, led to Zhang to opt to sell only one stake to Oracle, rather than a total divestment, the sources said.
It is a risky strategy. President Donald Trump has made it clear that he wants to see a direct sale of TikTok to an American technology company, amid concerns from national security officials that data from American users may be transmitted to the Communist Party government of China. It has threatened to ban TikTok in the United States as of September 20 if ByteDance does not comply.
READ: ByteDance Chooses Oracle as Partner to Try to Save US TikTok
Microsoft executives were frustrated over the course of last week when ByteDance stopped responding to an offer of more than $ 20 billion from the Redmond, Washington-based company for the TikTok business in the United States, three said. from the sources. The offer also allowed for future payments based on TikTok’s performance, one of the sources added.
This offering did not meet the expectations of ByteDance investors, the sources said. In defending its offer with the Trump administration and US lawmakers, Microsoft upset Zhang because it referred to TikTok as a security risk that it could fix, the sources added. ByteDance has maintained that its ownership of TikTok does not present such a risk.
Meanwhile, Sequoia and General Atlantic were working with Oracle on an alternative deal that would prevent a direct sale, according to sources. On Sunday, Microsoft announced that ByteDance had rejected its offer to acquire the US TikTok business.
This account of how ByteDance chose Oracle as its partner for the TikTok deal is based on interviews with six people with knowledge of the discussions who requested anonymity to reveal details. ByteDance and Microsoft did not immediately respond to requests for comment.
Oracle declined to comment, pointing to its statement the previous Monday confirming its participation in the proposed deal. General Atlantic and Sequoia also declined to comment.
READ: China would rather see TikTok US shutdown than forced sale
READ: Trump says there will be no extension of the TikTok deadline
ByteDance has worked feverishly in recent days on a proposed settlement that would allow the Chinese company to retain a minority stake in TikTok while addressing US security concerns, the sources said. Zhang refers to this deal in discussions with other ByteDance executives as a restructuring, the sources said. One of the sources called the proposed deal similar to a joint venture.
Oracle is in negotiations to acquire a sizable minority stake in TikTok’s US business, with the remainder owned by some large ByteDance investors, including General Atlantic and Sequoia, the sources said. Oracle would also take over the management of TikTok user data and would be responsible for its security, according to sources.
It’s unclear what valuation this deal would make of TikTok’s American business, which has up to 100 million users.
The proposal calls for the Committee on Foreign Investment in the United States (CFIUS), the US government panel that oversees the deal negotiations, to approve the directors of TikTok’s board, as well as relationships with major providers, added the sources. The deals would be similar to those established by CFIUS when Lenovo acquired IBM’s personal computer business in 2005 and SoftBank Group acquired US wireless operator Sprint in 2013, according to sources.
ByteDance also plans to argue that CFIUS ‘approval two years ago of China Oceanwide Holdings’ purchase of US insurer Genworth Financial Inc provides precedent for its proposal with Oracle, Reuters reported Sunday.
In that agreement, China Oceanwide agreed to use a US-based third-party service to manage Genworth’s policyholder data in the US. ByteDance will argue that a similar agreement with Oracle may protect user data. from TikTok in the US
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ByteDance has also made other concessions to appeal to Trump, the sources said. It has offered TikTok the creation of 25,000 jobs in the United States, compared to just over 1,000 employees in the United States today, according to sources.
ByteDance hopes that Oracle founder Larry Ellison’s fundraising for Trump, as well as Oracle CEO Safra Catz’s endorsement of Trump’s transition team four years ago, will also increase its chances, the sources said.
READ: TikTok Owner Will Invest Billions, Recruit Hundreds In Singapore Over 3 Years: Source
So far, the White House has been evasive in its discussions with ByteDance, and it is unclear if the proposed deal will go ahead, the sources said. On Monday, Treasury Secretary Steven Mnuchin said CFIUS would review the deal this week and make a recommendation to Trump.
The White House did not respond to a request for comment.
Reuters reported last week that the Chinese government would rather see the closure of TikTok in the United States than see it as part of a forced sale. You should approve the transfer of the TikTok algorithm to a foreign buyer.
The proposed deal with Oracle would not require ByteDance to apply to Chinese authorities for an export license for the TikTok algorithm, the sources said.
