The House passed a bill that would give TikTok's Chinese owner about six months to sell the short-video app. (Mike Blake/Reuters)
A forced sale of TikTok within 180 days, as House-passed legislation requires, would be one of the thorniest and most complicated transactions in corporate history, posing financial, technical and geopolitical challenges that experts said could render a sale impractical and increase the likelihood the app will be banned nationwide.
The bill, which President Biden has said he would sign, raced through the House but faces a slow-walk in the Senate and constitutional challenges in the courts. Yet financial experts say the complex legislative process targeting the video app, which is owned by the China-based internet giant ByteDance, may end up being easier than any subsequent transaction.
A sale would require severing a company worth potentially $150 billion from its technical backbone while being the subject of legal challenges and resistance from China, which has pledged to block any deal.
While the bill’s supporters have argued that it’s not a ban, the practical difficulties would raise the chance TikTok would fail to meet the six-month divestiture deadline — after which, it could be blocked for its 170 million users nationwide.
“As we would say in the business, the amount of hair on the transaction is so extreme,” said Lee Edwards, a former mergers and acquisitions partner at the law firm Shearman & Sterling, using a term of art for a complicated deal with uncertain prospects.
To complete a deal of this size and complexity in half a year, including passing any regulatory review that might be required in countries around the world, would be “extraordinarily fast and aggressive,” he added. Any buyer would need to devote “huge amounts of management and strategic planning resources … with a high risk of failure.”
TikTok, one of the world’s most popular apps, would probably sell for more than $100 billion, according to one financial analyst’s estimate. And that may be low: TikTok made $16 billion in sales in the United States last year, the Financial Times reported — a revenue figure that could value the company at up to $150 billion.
That price tag would put it in a realm few buyers could touch and set a new milestone for Big Tech acquisitions. But a purchase by a rival tech giant would probably face heavy antitrust scrutiny in the United States and in countries around the world, which would slow the process, if not stop it altogether.
“There is a very short list of bidders here,” said David Locala, the former head of global technology mergers and acquisitions at Citi, the American multinational investment bank. U.S. regulators may “have to pick their poison: Do they want U.S. ownership of TikTok, or do they want one or more of the Big Tech companies to get even bigger?”
At a $100 billion purchase price, TikTok would rank among the biggest merger-and-acquisition deals in history, probably adding to the complexity and time demands. AOL’s merger with Time Warner in 2000, for $182 billion, took roughly a year to finalize.
Elon Musk’s purchase of Twitter, for $44 billion in 2022, took about six months to close — and that was a sale Twitter’s board desperately wanted. Facebook’s $19 billion acquisition of WhatsApp in 2014, which Forbes said was “hashed out in [chief] Mark Zuckerberg’s house over the course of a few days … and sealed over a bottle of Johnnie Walker scotch,” nevertheless took seven months to close once all the regulatory hoops were cleared.
Nevertheless, the potential to own a crown jewel of the internet has spurred wealthy suitors into action. Former treasury secretary Steven Mnuchin, who runs a private equity firm that the New York Times reported in 2022 had secured hundreds of millions of dollars in commitments from Saudi Arabia and other foreign funds, told CNBC last week that he was assembling a group of investors hoping to buy TikTok.
As Treasury chief, Mnuchin urged former president Donald Trump in 2020 to push for a forced sale of TikTok. Trump’s effort, during which he demanded that the United States receive a “very large” cut of the sale proceeds, was later halted in court. Mnuchin declined to give details on the group’s investors or the sources of their funds.
Bobby Kotick, the former chief of video game giant Activision Blizzard, and Kevin O’Leary, the Canadian investor from the TV show “Shark Tank,” have both expressed interest in a TikTok deal. But they may not have the money to seriously pursue a takeover, and pooling their funds as part of an investment consortium would present its own headaches, Locala said. (Microsoft bought Activision Blizzard last year for $69 billion; that deal didn’t close for 633 days after it was announced.)
With consortia, “you never know whether somebody is really in or not until the end in those things,” Locala said. “The more parties you introduce to it, [the more] it just gets unwieldy to be able to make any progress.”
Even beyond the “eye-popping” price tag, a TikTok sale probably would be subject to a set of “aggressive legal challenges” that could further run down the clock, Wedbush Securities research analyst Dan Ives said in a note to investors.
“Detaching the algorithm from ByteDance would be a very complex process,” Ives said. China and ByteDance “will never allow the source code to be sold to a U.S. tech company in our view, which makes this all a spiderweb issue for any potential strategic buyer.”
China said last year that it would strongly oppose any forced sale of TikTok, and its foreign ministry spokesperson, Wang Wenbin, said the House bill was built on “robber’s logic” around a valuable asset.
After Trump pushed to force TikTok’s sale in 2020, China added recommendation algorithms — the nerve center of TikTok’s video feed — onto its export-control list, mandating that any sale be subject to government approval. The United States uses similar export controls to limit what technology can be sold to China and other countries.
Liu Pengyu, a spokesperson for the Chinese Embassy in Washington, said in a statement that a forced sale would contradict “the principle of fair competition and norms of international trade.”
“It is unfair to use national security as a pretext to bring down successful companies of other countries,” Liu said. “It is wrong to try all means to snatch from others the good things that they have.”
A Biden official, who spoke on the condition of anonymity to describe internal thinking, said the administration’s goal was for TikTok to be divested, not banned, for the sake of American national security. The official accused China of calling for an absurd double standard, given its years-old policy of blocking foreign social media apps.
A forced sale of TikTok also raises the specter of retaliation against U.S. companies in China, with Beijing having taken a tit-for-tat approach in the past. Some major American-owned businesses, such as Apple, derive a large share of their revenue from China.
Top-level U.S.-China diplomacy has at times shaken free deals that had seemed hopeless, including China’s acquiescing to chip maker Broadcom’s purchase of cloud computing company VMware in November, shortly after Biden met in California with China’s leader, Xi Jinping.
Beijing had claimed regulatory authority in the deal, even though both companies are headquartered in the United States. But they also do robust business in China, and in the current tense diplomatic environment, “everybody was thinking the deal was going to get blocked,” Locala said. (It’s unclear why China relented, though some suspect the Biden-Xi meeting played a role.)
The forced sale of TikTok, though, would be a harder pill for Beijing officials to swallow. China probably would balk at allowing the United States to dictate what happens to one of its trophy companies, said Paul Triolo, a technology policy lead at the Washington-based business consulting firm Albright Stonebridge Group who specializes in Chinese business and economics.
“Beijing will object in principle to both the political circus it sees in Washington over the TikTok issue and to any forced divestiture which involves a company … being pressured entirely based on its China links,” Triolo said.
The ByteDance technology that powers TikTok, he said, “is a critical piece of intellectual property for the company, and again Beijing would object to the precedent a forced divestiture involving AI algorithms could set.”
There is recent precedent for a forced sale. In 2019, the United States demanded that a China-based tech company reverse its purchase of the LGBTQ+ dating app Grindr due to federal officials’ concerns over its data on American users, including military service members. The company, Kunlun Tech, sold the app for $608 million to a U.S.-based investment group, San Vicente Acquisition, which has since taken it public. But the sale took a year to arrange.
And that deal was a fraction of the size of any likely TikTok divestiture: Grindr at the time had 13 million global users, compared with TikTok’s 170 million in the United States alone, and sold for less than 1 percent of TikTok’s expected sale price. That deal required merely undoing an acquisition, rather than carving off a business from its longtime ownership.
TikTok saw numerous suitors for a complete or partial acquisition in 2020, including Microsoft, Walmart and Oracle. Those companies might show interest again, especially given that TikTok’s U.S. user base has nearly doubled in the last four years.
Oracle already has a working relationship with TikTok, first negotiated under lobbying by Mnuchin in 2020, as its “trusted technology partner,” housing its U.S. user data and conducting algorithm reviews. Oracle’s home state is also the namesake of TikTok’s Project Texas proposal, a $1.5 billion plan the company submitted to regulators in 2022 in hopes of satisfying U.S. national security concerns.
Representatives from Oracle, Microsoft and Walmart did not respond to requests for comment.
It’s unclear what ByteDance intends to do, or if it’s made any preparations for such a divestiture demand after years of regulatory pressure in Washington. TikTok’s chief executive, Shou Zi Chew, said after the House vote that the company would exercise its “legal rights” to block the bill.
ByteDance says it is 60 percent owned by big international investors, including the U.S. investment firms Susquehanna Investment Group and General Atlantic, some of whom could push to use that stake to gain control of a TikTok spinoff. The other 40 percent is split between ByteDance’s Chinese founders and its 150,000 employees, thousands of whom are Americans.
Any of them might pursue their own actions against being coerced to sell off a stake in the company’s biggest global success story. Without a complete buyout of Chinese shareholders, federal authorities — such as the Committee on Foreign Investment in the United States, or CFIUS, which has been negotiating with TikTok for years — could still push for further scrutiny of whether the deal goes far enough.
It’s also unclear how a sale would split up TikTok’s offices and workforces. The company employs 7,000 in the United States, runs two global headquarters in Los Angeles and Singapore and staffs nine other offices around the world, including in New York, London, Paris, Jakarta and Tokyo. (None of the offices are in China, where ByteDance is based.)
If the bill quickly cleared the Senate, the 180-day sale window could conclude just before the 2024 presidential election, potentially raising questions over how its new owner might change the app’s rules and inner workings for its own political benefit.
But if TikTok isn’t sold, the federal government could work to block the platform by exerting pressure on Apple, Google and other tech companies who run the app stores, cloud-computing and web-hosting services that power and distribute it.
That process could be easily circumvented through loopholes and workarounds, said Bruce Schneier, a security technologist and Harvard Kennedy School lecturer who reviewed the possible outcomes last year.
A more effective blanket ban, he said, “would necessitate a national firewall, like the one China currently has, to spy on and censor Americans’ access to the internet.”
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文章来源：Washington Post
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