Walmart joins Microsoft bid for TikTok as CEO of social media app quits

Thursday, August 27, 2020

Walmart Inc (WMT.N) said it was joining Microsoft in a bid for social media company TikTok’s U.S. assets, revealing its plans hours after the social media company’s chief executive, Kevin Mayer, said he would step down.

Mayer is leaving just three months after joining, in the middle of negotiations to sell the Chinese-owned video app’s U.S. operations to Microsoft Corp (MSFT.O) or Oracle Corp (ORCL.N).

Retailer Walmart lauded TikTok’s e-commerce and advertising capabilities. The sale of TikTok is happening as the company is under fire from the administration of U.S. President Donald Trump as a potential national security risk due to the vast amount of private data the app is compiling on U.S. consumers.

The Trump administration has demanded that China’s ByteDance, which owns TikTok globally, sell its U.S. operations. Earlier this week, TikTok also sued over an executive order effectively banning it in the United States.

“We are confident that a Walmart and Microsoft partnership would meet both the expectations of U.S. TikTok users while satisfying the concerns of U.S. government regulators,” Walmart said in a statement.

It said that the three-way partnership would help Walmart reach customers across virtual and physical sales channels and to grow its online marketplace and its advertising business. Shares of Walmart rose 6%.

Mayer was Walt Disney Co’s (DIS.N) top streaming executive before becoming chief executive officer of TikTok and chief operating officer of parent ByteDance on June 1.

ByteDance founder and CEO Zhang Yiming said in a separate letter reviewed by Reuters that the company was “moving quickly to find resolutions to the issues that we face globally, particularly in the U.S. and India”.

He said Mayer had joined just as the company was “entering arguably our most challenging moment.”

“It is never easy to come into a leadership position in a company moving as quickly as we are, and the circumstances following his arrival made it all the more complex,” Zhang said.

U.S., INDIA CHALLENGES

Amid growing distrust between Washington and Beijing, Trump complained that TikTok was a national security threat and could share information about users with China’s government.

Trump issued an executive order banning U.S. transactions with TikTok on Aug. 6, effective in mid-September. He issued a separate order about a week later giving ByteDance 90 days to divest of TikTok’s U.S. operations and data.

ByteDance has been in talks to sell TikTok’s North American, Australian and New Zealand operations which could be worth $25 billion to $30 billion to companies including Microsoft and Oracle, people with knowledge of the matter have said.

The company has also been targeted in India, where TikTok was one of 59 Chinese apps banned by the Indian government in June following a border clash between India and China.

That month, Mayer wrote to India’s government saying China’s government has never requested user data, nor would TikTok turn it over if asked.

TechCrunch reported earlier this month that ByteDance was in talks with India’s Reliance for investment in TikTok.

TikTok has become a global sensation since ByteDance launched the app in 2017, with operations in countries such as France, South Korea, Indonesia, Russia and Brazil. In April, the app hit 2 billion downloads globally.

LITTLE SURPRISE

Mayer was scheduled to leave TikTok as part of the planned sale, as the global role he had been hired for would no longer exist, according to a person familiar with the matter.

Media reports earlier on Thursday that Mayer was leaving the company accelerated the announcement, the source added.

Zhang has been the key person in TikTok sale talks, said two people with knowledge of the matter. But Mayer represented TikTok to discuss with senior executives of interested buyers just days ago, a third person said.

TikTok’s decision to launch a $200 million “creator fund” in July was spearheaded by TikTok’s former head Alex Zhu, though Mayer was also directly involved, said two of the people. The project was initiated internally much earlier than Mayer’s arrival, one of the people said.

ByteDance did not immediately respond to Reuters’ request for comment.

“Whether TikTok reaches an agreement to sell its U.S. business or decides to duke it out in the courts, the role for Mayer will not be anything like that he had envisioned when he joined,” said Mark Natkin, managing director of Marbridge Consulting in Beijing.

Mayer’s departure is not a great boost for company morale right now, Natkin said.

Reporting by Yingzhi Yang in Beijing, Kanishka Singh in Bengaluru and Katie Paul in San Francisco, and Echo Wang in New York; Writing by Brenda Goh and Joshua Franklin; Editing by Anil D'Silva, Christopher Cushing and Lisa Shumaker