(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

 

SAN FRANCISCO - TikTok is finding out the hard way that the Oval Office may hold the trump cards in deals that raise national security concerns. President Donald Trump pushed for a sale of the popular video app, then threatened to ban it, prompting a call between him and suitor Microsoft’s Chief Executive Satya Nadella to salvage talks. The seller, parent company Beijing-based ByteDance, and other potential buyers have much to worry about.

Trump is playing dealmaker in what could be Microsoft’s biggest acquisition since it bought LinkedIn in 2016 for $26 billion. After both Reuters and the Wall Street Journal reported back-and-forth talks over the weekend, the $1.6 trillion company said on Sunday it would continue forging ahead after a call directly with the president.

Overseas ownership of companies or assets in the United States often draw the attention of the Committee on Foreign Investment. That panel made up of various government agencies has been investigating ByteDance’s 2017 purchase of lip-syncing app Musical.ly, which merged with TikTok. Most companies don’t bother to fight back, but in the rare occasions they do, a U.S. president may jump in.

That happened in 2012, the only legal challenge to CFIUS since it was established in 1975, when Chinese-based Sany Group’s affiliate Ralls Corp. bought wind farms in Oregon. Then- President Barack Obama ordered Ralls to not only divest the wind farms, but also forced it to remove items added to the facilities, including concrete foundation, and barred employee access to the premises. Sany complied.

That deal reaffirmed the commander-in-chief has carte blanche on M&A security risks. And Trump’s administration has meddled several times since. In March, Trump required Beijing Shiji Information Technology to sell hotel management software firm StayNTouch. In 2018, Ant Financial dropped its $1.2 billion purchase of MoneyGram. The Chinese owner of dating app Grindr was ordered to sell it three years after buying it in 2016.

The tougher environment has affected other deals. A banker told Breakingviews of two recent instances in which a Chinese firm received higher offers from Chinese suitors but went with a lower price from a U.S. buyer to avoid CFIUS reviews. ByteDance is the latest in a long line of Chinese firms that have learned Uncle Sam is the ultimate poison pill.

 

CONTEXT NEWS

- Microsoft said on Aug. 2 it would continue talks to purchase video app TikTok in the United States after the software maker’s Chief Executive Satya Nadella spoke to U.S. President Donald Trump. Microsoft said it is in talks with TikTok owner ByteDance, based in Beijing, to acquire the service in the United States, Canada, Australia and New Zealand. Microsoft, which said talks will conclude no later than Sept. 15, may invite other U.S. investors to take a minority stake.

- The U.S. Committee on Foreign Investment in the United States agrees that TikTok cannot stay in its current form, U.S. Treasury Secretary Steven Mnuchin told ABC News on Aug. 2. The service poses the risk of giving data on 100 million Americans to the Chinese government, he said. The options are having Trump force a sale or ban the company.

- Trump said on July 31 that he planned to ban TikTok. Reuters reported on Aug. 1 that ByteDance agreed to completely divest of TikTok’s U.S. operations, instead of retaining a minority stake, to salvage a deal to sell the unit, possibly to Microsoft. The Wall Street Journal reported on Aug. 2 that the negotiations with Microsoft had paused because Trump was opposed to the deal.

 

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

(Editing by Lauren Silva Laughlin and Sharon Lam) ((gina.chon@thomsonreuters.com; Reuters Messaging: gina.chon.thomsonreuters.com@reuters.net))