By Sarah Nassauer, Georgia Wells 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 28, 2020).
The race to capture TikTok's U.S. operations took a sharp turn
Thursday, as Walmart Inc. said it is joining Microsoft Corp.'s bid
for the popular video-sharing app after other deep-pocketed suitors
dropped out of the running.
The retail giant's entry into the global sweepstakes was a
surprise and comes as the parties grapple with a valuation for
TikTok, which is facing a potential ban in the U.S. from the Trump
administration over national-security concerns.
TikTok's Beijing-based owner ByteDance Ltd. is asking about $30
billion for the U.S. operations, but bidders thus far haven't been
willing to meet that price, according to people familiar with the
negotiations. By comparison, Twitter Inc. in recent weeks
informally floated a bid closer to $10 billion as part of a range
of pricing and scenarios, said some of the people.
Microsoft's joint bid with Walmart is considered the
front-runner, according to people familiar with the matter, while a
second consortium including Oracle Corp. remains in the
running.
Walmart was initially working on a bid with Google parent
Alphabet Inc. and Tokyo-based tech investor SoftBank Group Corp., a
person familiar with the discussions said.
Google was involved in talks as recently as earlier this week,
according to people familiar with the matter. Those talks are now
dead, and SoftBank is also no longer in the running, people
familiar with the matter said. Twitter's bid has lost momentum,
according to some of the people.
The Trump administration has said it wants TikTok's U.S.
operations to be owned by an American company with tech
expertise.
TikTok has been aiming to pick a bidder to enter exclusive
negotiations and seal a deal as early as next week, according to
people familiar with the deliberations.
Even as investors push for a deal, ByteDance founder Zhang
Yiming is still not fully on board with selling his creation. Mr.
Zhang has been frustrated by the U.S. demands and has told people
he might abandon the sale process and live with the consequences
from the Trump administration, according to people familiar with
the matter.
The company is facing a mid-September deadline to sell its
American operations, under an executive order issued by President
Trump earlier this month. TikTok on Monday filed a lawsuit
challenging the order.
TikTok, an app that shot to popularity with its videos of
dancing and lip-syncing teenagers, has been downloaded more than
two billion times since its launch, according to mobile-data
research firm Sensor Tower.
The company will now proceed with deal negotiations without its
high-profile American chief executive, Kevin Mayer, who joined
TikTok from Walt Disney Co. three months ago. Mr. Mayer resigned
Wednesday, saying the political environment had changed
significantly since taking the job.
Walmart said it believes a potential partnership with Microsoft
would address U.S. government concerns about TikTok. Unlike big
tech companies that have been in the Trump administration's
crosshairs, Walmart has close ties to the White House.
The retailer's chief executive, Doug McMillon, has traveled to
the White House on several occasions, and Mr. Trump has praised
Walmart and other big chains for helping with Covid-19 testing
efforts during the pandemic.
Oracle's rival bid also claims White House connections. Larry
Ellison, the company's co-founder, chairman and largest
shareholder, earlier this year threw a fundraiser at his house for
the president. Chief Executive Safra Catz worked on the executive
committee for the Trump transition team in 2016.
The Oracle bid is proceeding with several of ByteDance's
existing investors, including Sequoia Capital, General Atlantic and
Coatue Management LLC.
Walmart and Microsoft are already partners on several technology
projects, with the retailer using Microsoft's cloud computing
services, as they seek a counterweight to Amazon.com Inc.
"The way TikTok has integrated e-commerce and advertising
capabilities in other markets is a clear benefit to creators and
users in those markets," Walmart said in a statement.
Microsoft declined to comment but has said it was pursuing a
deal for TikTok's U.S. operations and might invite other American
investors.
Walmart's shares jumped more than 4% on the news in Thursday
afternoon trading to near a record high, approaching a $400 billion
market capitalization. The stock price has rallied this year as the
big-box retailer has managed to operate throughout the pandemic.
Demand from shoppers looking for groceries and household staples
has led to surging sales and a jump in e-commerce revenue.
The world's biggest retailer by revenue has been ramping up its
online business in recent years, paying $3.3 billion to acquire
Jet.com in 2016 and striking a $16 billion deal two years later for
a controlling stake in Flipkart, an Indian e-commerce company.
But Walmart, like Amazon, has also looked to move beyond its
retail roots, by developing an online marketplace to sell a wider
range of products from third-party sellers and smaller merchants.
It has also sought to create its own digital ad network. The
company aims to use those services to generate new revenue streams
beyond its supercenters, which currently account for most of its
more than $500 billion in annual revenue.
Until now, Walmart has mostly used social media to advertise
products. But the company has also begun to offer its own digital
ad space and access to shopper data, mainly to its existing
suppliers. An ownership stake in TikTok could allow Walmart to use
the video platform to sell ads to its suppliers -- and potentially
to sell its own products through the app.
--Miriam Gottfried, Rob Copeland, Liza Lin and Maureen Farrell
contributed to this article.
Write to Sarah Nassauer at sarah.nassauer@wsj.com, Georgia Wells
at Georgia.Wells@wsj.com and Cara Lombardo at
cara.lombardo@wsj.com
(END) Dow Jones Newswires
August 28, 2020 02:47 ET (06:47 GMT)
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