Microsoft confirmed that it is in talks to buy TikTok from China’s ByteDance — and expects to conclude the M&A negotiations by Sept. 15 — coming after Donald Trump said he opposed such a deal and has claimed he plans to ban TikTok.
Microsoft said that if it consummated a deal for TikTok, it would move all data servers covering U.S.-based users to American shores, in a bid to alleviate U.S. policymakers’ concerns that Chinese government officials might be able to track TikTok users or access private messages. TikTok has said it has more than 100 million users in the U.S.
“Following a conversation between Microsoft CEO Satya Nadella and President Donald J. Trump, Microsoft is prepared to continue discussions to explore a purchase of TikTok in the United States,” the Redmond, Wash.-based tech giant said in a statement Sunday.
Trump told reporters Friday he planned to take some kind of action to ban TikTok over national-security concerns given the popular social-video app’s Chinese ownership. However, experts have questioned whether such a move would hold up on legal grounds.
Microsoft, in its statement, said, “Microsoft fully appreciates the importance of addressing the President’s concerns. It is committed to acquiring TikTok subject to a complete security review and providing proper economic benefits to the United States, including the United States Treasury.”
Reps for TikTok and ByteDance didn’t respond to requests for comment on Microsoft’s announcement.
TikTok has been valued at $50 billion by a group of ByteDance’s U.S.-based investors including Sequoia and General Atlantic, who also have been seeking to acquire control of TikTok, Reuters reported last week.
Microsoft cautioned that the talks with ByteDance are preliminary and that “there can be no assurance that a transaction which involves Microsoft will proceed.” The company said it doesn’t plan to provide additional info “until there is a definitive outcome to our discussions.”
In any event, Microsoft said, it plans on “completing these discussions” with ByteDance about an acquisition of TikTok no later than Sept. 15, 2020.
Among other measures, Microsoft said, it would ensure that all private data of TikTok’s U.S. users “is transferred to and remains in the United States. To the extent that any such data is currently stored or backed up outside the United States, Microsoft would ensure that this data is deleted from servers outside the country after it is transferred.”
“This new structure would build on the experience TikTok users currently love, while adding world-class security, privacy, and digital safety protections. The operating model for the service would be built to ensure transparency to users as well as appropriate security oversight by governments in these countries,” Microsoft’s statement said.
According to Microsoft, ByteDance and Microsoft notified the interagency Committee on Foreign Investment in the United States (CFIUS) of their intent to explore a preliminary proposal that would involve Microsoft buying TikTok’s operations in the U.S., Canada, Australia and New Zealand. Microsoft said it “may invite other American investors to participate on a minority basis in this purchase.”
TikTok recently hired former Disney exec Kevin Mayer as CEO, who also joined ByteDance as COO. In a move aimed at alleviating security fears over the app, Mayer last week announced that TikTok will publicly disclose the app’s algorithms, moderation policies and data flows.
An acquisition by Microsoft might be TikTok’s best path forward at this point. With “ByteDance’s back against the wall,” Microsoft has emerged as “being the only possible white knight,” Wedbush Securities’ Dan Ives wrote in a research note.
A deal for TikTok would vault Microsoft into the still-growing social media sector, which has seen massive growth over the past decade of services like Facebook, Instagram, Snapchat and Twitter. Microsoft’s big strategic internet acquisitions in recent years have included LinkedIn for $26.2 billion in 2016 and Minecraft for $2.5 billion in 2014, both of which it has largely left intact as autonomous divisions.