Walmart announced yesterday that it is joining Microsoft in pursuing an acquisition of TikTok's US business from Chinese internet company ByteDance.
The Wall Street Journal reports that "the retail giant’s entry into the global sweepstakes was a surprise and comes as the parties grapple with a valuation for TikTok, which is facing a potential ban in the U.S. from the Trump administration over national-security concerns … The Trump administration has said it wants TikTok’s U.S. operations to be owned by an American company with tech expertise."
In confirming its role, Walmart said in a prepared statement, "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.”
The bidding at the moment seems to be between the Walmart-Microsoft partnership and an investor group headed up by Oracle.
The New York Times writes that "Prices for a potential deal have ranged from $20 billion to $50 billion, people with knowledge of the talks have said. It was unclear what bid amounts were submitted.
"Microsoft, with $137 billion in cash and a market value of more than $1.7 trillion, is far larger than other potential acquirers and has the deepest resources. Oracle, with a market value of $175 billion, has roughly $43 billion in cash and short-term investments, and also holds debt."
The Times reports that "a deal with Microsoft and Walmart could draw on Walmart’s digital sales background to turn TikTok into a kind of e-commerce app for both creators and users, people involved in the talks said … A deal with Oracle, the enterprise software company, would be more of a data play. Oracle could use TikTok’s data about social interactions to benefit its cloud, data and advertising businesses, the people said."
CNBC reports that TikTok was on Walmart's radar before it teamed up with Microsoft:
"Walmart was part of a consortium put together by SoftBank Chief Operating Officer Marcelo Claure, which also included Google parent company Alphabet, according to people familiar with the matter.
"SoftBank’s Claure felt Walmart’s all-American image and Google’s cloud computing infrastructure backbone could be a way in for the Japanese technology company, which has specialized in buying young, high-flying technology companies in recent years, including Uber and WeWork, said the people, who asked not to be named because the discussions were private. The deal structure would have had Walmart as the lead buyer, with SoftBank and Alphabet acquiring minority stakes. One or two other minority holders held talks to join the consortium, two of the people said.
"Walmart wanted to be the exclusive e-commerce and payments provider for TikTok and have access to user data to enhance those capabilities, one of the people said."
- KC's View:
It seems clear that if this deal goes through, Walmart is going to get a lot younger … at least in terms of its orientation.
One of Walmart's priorities recently has been in building up its third-party marketplace, and having access to TikTok customers and their data would be an enormous advantage as it looks to bring in new vendors and suppliers. And since this builds on an existing relationship with Microsoft, one would imagine that the process would be relatively frictionless … or at least as frictionless as any $50 billion acquisition can be.
These are customers to which Walmart may not have much brand equity, and so this could be a powerful tool … though I'd guess that Walmart's role may be hidden rather than out front. (It works better as a TikTok marketplace as opposed to be branded as Walmart.)