© Reuters. People walk past the Bytedance main building in Beijing
By Yingzhi Yang and Kane Wu
BEIJING / HONGKONG (Reuters) – A possible wedding with a shotgun Microsoft Corp. (O 🙂 for TikTok's US operations triggered an outcry on Chinese social media on Monday as well as criticism from a prominent Chinese investor in TikTok owner ByteDance.
The American technology giant officially expressed interest on Sunday after President Donald Trump, who led the national security risks of the Chinese short video app, reversed the course of a proposed ban and gave the two companies 45 days to reach an agreement achieve.
The proposed acquisition of parts of TikTok with 100 million US users would give Microsoft the rare opportunity to become a major competitor to social media giants such as Facebook Inc. (O 🙂 and Snap Inc. (N :).
The shares of Microsoft, which owns the business social media network LinkedIn (NYSE 🙂 and also wants to buy the Canadian, Australian and New Zealand shares of TikTok, rose almost 3% in early trades on Monday.
ByteDance has not publicly confirmed the sales talks. In an internal letter to Reuters employees on Monday, the company's founder and CEO, Zhang Yiming, said the company had started discussions with a technology company that had not been identified to pave the way, "so we can continue using the TikTok app in the United States. " ""
It will be a huge task to make a deal that satisfies all parties and may act as a lightning rod for US-China relations.
People close to the situation have told Reuters that TikTok could have a total value of $ 50 billion, but the forced sale of the US division and a few other entities alone will likely bring much less.
"A forced deal under Washington's shotgun could open up to endless litigation if it led to existing unfavorable results for existing private shareholders," said Fred Hu, chairman of Primavera Capital Group, investor in ByteDance and one of China's best-known private equity groups.
Hu said Microsoft was a credible buyer, but asked how selling large parts of TikTok's business at such an early stage of its growth could ever be a good deal for ByteDance.
"It makes absolutely no sense. Bytedance is an innocent victim of crazy politics and crazy geopolitics. It's a sad result for bytedance, entrepreneurial capitalism, and the future of global trade," he said.
Tech bankers in Asia said investment banks working on the deal should be careful not to upset Trump.
"This is not a standard M&A situation … this is difficult to predict," said a senior banker at a US bank in Hong Kong, saying that it was a question of how to structure a deal to get Washington stay happy.
Zhang's letter to employees also stated that ByteDance disagreed with the position of the United States Foreign Investment Committee (CFIUS), which reviews business for national security risks, and must completely sell TikTok's U.S. operations.
"We disagree with this CFIUS conclusion," it said in the letter, but added: "… we understand the decision in the current macro environment."
ByteDance did not respond to Reuters requests for comments.
The Chinese government declined to comment specifically on Washington's move to force TikTok's US operations to be sold.
The United States "expanded the concept of national security" and assumed that companies are guilty without evidence, China's State Department spokesman Wang Wenbin said in a briefing after being asked about US measures against Chinese software companies.
The topic "ByteDance agreed to sell TikTok's US operations" was one of the most discussed topics on China's Twitter-like Weibo (NASDAQ 🙂 platform with over 920 million views on Monday.
Some commentators criticized ByteDance and said it didn't show as much of the backbone as Huawei Technologies, also in the crosshairs of tension between the U.S. and China, and now on a U.S. trade blacklist.
"(ByteDance) knelt so quickly that it didn't even wait for the Chinese government to retaliate," said a comment that was "liked" over 5,000 times.
While TikTok is ByteDance's best known app in the world, the company generates most of its revenue from advertising on Chinese apps, including Douyin – a Chinese version of TikTok – and the news aggregator app Jinri Toutiao.