(Reuters) – President Donald Trump only agreed that Microsoft could negotiate the takeover of the popular short video app TikTok if a deal could be made in 45 days, said three people familiar with the matter on Sunday.
The move marks a U-turn for Trump, prompting the U.S. technology giant to express interest in the blockbuster social media deal, which could further flare up U.S.-China relations. Trump said on Friday he was planning to ban TikTok, fearing that his Chinese property could pose a national security risk due to the personal information he processes.
The proposed acquisition of TikTok, which is attended by hundreds of millions of US users, offers Microsoft the rare opportunity to become a major competitor against social media giants like Facebook and Snap. Microsoft also owns the professional social media network LinkedIn.
Trump had rejected the idea of a sale to Microsoft on Friday. After a discussion between Trump and Microsoft CEO Satya Nadella, the Redwood, Washington-based company said in a statement on Sunday that it would continue negotiations on the takeover of TikTok by ByteDance and would reach agreement by September 1
This is a deadline set by ByteDance and Microsoft for the United States Foreign Investment Committee (CFIUS), which sources sources said that it does business for potential national security risks.
Trump changed his mind under pressure from some of his advisors and many members of his republican party, one of the sources said. TikTok’s ban would alienate many of its young users prior to the November US presidential election and would likely trigger a wave of legal challenges. Several prominent Republican lawmakers have made statements in the past two days asking Trump to support the sale of TikTok to Microsoft.
“A win-win situation,” Senator Lindsey Graham (R-SC) tweeted in response to Trump’s new stance on Sunday.
Negotiations between ByteDance and Microsoft are being overseen by CFIUS, a U.S. government body that has the right to block any agreement, sources said who asked for anonymity before the White House announcement. Microsoft warned in its statement that there is no certainty that an agreement will be reached.
“Microsoft fully appreciates the importance of addressing the President’s concerns. It is determined to acquire TikTok, subject to a full security review, and to offer reasonable economic benefits to the United States, including the US Treasury Department, ”Microsoft said in a statement.
ByteDance and the White House did not immediately respond to requests for comments on the Microsoft talks. In a statement released late Sunday that did not mention TikTok, ByteDance said it was facing “complex and unimaginable difficulties” to become global.
As U.S.-China relations deteriorate in terms of trade, Hong Kong autonomy, cyber security, and the spread of the novel corona virus, TikTok has emerged as the focus of the dispute between the world’s two largest economies.
State-sponsored newspaper China Daily On Monday, ByteDance called the victim of a “witch hunt” from the United States, saying that Washington had provided no evidence to support its claim that TikTok was a threat to US national security.
As part of the proposed contract, Microsoft announced it would take over TikTok’s operations in the United States, Canada, Australia and New Zealand. It would ensure that all TikToks US users’ private data is transferred to and remains in the United States.
Microsoft could invite other US investors to purchase minority stakes in TikTok, the company added. About 70% of the debt capital raised by ByteDance comes from the United States.
It’s not clear how much Microsoft could pay for TikTok. Reuters reported last week that ByteDance’s valuation expectations for the app exceeded $ 50 billion, although pressure from the US to sell it could lower that price.
A key issue in the negotiations will be the separation of TikTok technology from the ByteDance infrastructure and access to address US concerns about the integrity of personal data. ByteDance also owns a Chinese short video app called Douyin, which is based on the same code used for TikTok.
One idea under consideration is to give Microsoft and ByteDance a transition period to develop technologies for TikTok that will be completely separate from ByteDance, one of the sources said.
Microsoft said it had no intention of providing further updates until a final outcome in the negotiations was reached.
The United States has increasingly checked app developers for their personal information, especially if some of them are U.S. military or intelligence officials. The order to divest TikTok is not the first time the White House has taken action on such concerns.
Earlier this year, Chinese game company Beijing Kunlun Grindr, a popular gay dating app it bought in 2016, sold for $ 620 million after being ordered by CFIUS for sale.
In 2018, CFIUS forced China’s Ant Financial to end plans to buy MoneyGram (MGI.O) due to concerns about the security of data that could identify U.S. citizens.
ByteDance was worth up to $ 140 billion earlier this year when one of its shareholders, Cheetah Mobile (CMCM.N), sold a small stake in a private business, Reuters reported. The Japanese soft bank (9984.T) is one of the start-up’s investors.
(Reporting by Greg Roumeliotis and Echo Wang in New York and Matt Spetalnick in Washington, DC Additional reporting by David Shepardson, Peter Schroeder and Alexandra Alper in Washington, DC and Brenda Goh and Engen Tham in Shanghai. Edited by Jacqueline Wong, Dan Grebler and Edwina Gibbs.)