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Former US Treasury secretary Mnuchin putting together a group to buy TikTok

Bloomberg
Bloomberg • 4 min read
Former US Treasury secretary Mnuchin putting together a group to buy TikTok
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Steven Mnuchin is targeting a purchase of TikTok from its Chinese parent company, a day after House lawmakers passed a bipartisan bill that would ban the wildly popular social media app in the US.

The former US Treasury Secretary has spoken to potential co-investors about acquiring TikTok, he said in an interview with CNBC on Thursday, declining to give any specifics. US lawmakers are pushing for a ban of the app unless its owner ByteDance Ltd. divests it, driven by concerns over Chinese government influence on the American public.

If Mnuchin follows through with a purchase, it’ll be the second high-profile deal he will have marshalled this year, after leading a US$1 billion equity investment in troubled commercial real estate lender New York Community Bancorp. It would also mark his return to a saga that started in 2020, when former President Donald Trump first ordered ByteDance to sell its US assets.

It’s unclear whether Mnuchin, who runs a private investment firm that counts Saudi Arabia among its backers, will be able to pull off a deal. TikTok’s US business would be worth US$35 billion to US$40 billion, Bloomberg Intelligence estimates.

Though Mnuchin’s investment firm, Liberty Strategic Capital, raised about US$2.5 billion in 2021, the high valuation means he’d still need multiple equity investors to join any potential bid.

“It’s a great business,” Mnuchin said of TikTok in an interview with CNBC. “It should be owned by a US business. There’s no way the Chinese would ever let a US company run something like this in China.” He added that the social media app would be remade in the US with homegrown technology.

See also: Temasek hunts for domestic bets with geopolitical tension rising

House Measure
The US House voted overwhelmingly on Wednesday to approve a bill that would effectively eliminate the app in the US unless it finds a new owner in about six months. Now, the short-video app used by 170 million Americans has turned its lobbying efforts to the Senate, where passage is less certain. 

TikTok intends to exhaust all legal challenges before it considers any kind of divestiture, people familiar with the matter have told Bloomberg.

Representatives for TikTok didn’t immediately respond to a request for comment.

See also: Biden adds tariffs on Chinese chips, critical minerals, EVs

Mnuchin said that under his plan, no investor would own more than 10% of TikTok, and existing investors would have the option to roll over into the new ownership. While TikTok’s exact ownership structure is unclear, the plan could be a boon for the US investment companies that have bought into ByteDance.

Institutional investors including Carlyle Group Inc., General Atlantic and Susquehanna International Group own 60% of ByteDance; 20% is owned by the company’s global workforce; an additional 20% is owned by the company’s Chinese co-founder Zhang Yiming. 

Mnuchin believes that the Chinese government would back a sale of TikTok as long as there is no technology transfer. 

As the former as head of the Committee on Foreign Investment in the US, Mnuchin was instrumental in talks during Trump’s attempt to divest TikTok. At the time, Microsoft Corp had expressed interest in purchasing the popular video app and the former Twitter Inc. had also explored a possible bid.

Oracle Corp ultimately beat out a bid by Microsoft, and Mnuchin helped structure plans for a new company called TikTok Global, in which Oracle would acquire a minority stake in the new entity, which would be headquartered in the US with an independent board approved by the US government. The deal faded after Trump lost the 2020 election. 

Trump has since reversed course on TikTok, saying last week that he is opposed to the latest ban attempts. 

Other Buyers 
Bobby Kotick, the former chief executive officer of Activision Blizzard Inc, has also expressed interest in buying TikTok, the Wall Street Journal has reported. Kotick is looking for partners and at a dinner earlier this month, he floated the idea to several people including OpenAI CEO Sam Altman.

The list of cash or equity buyers is short. Meta Platforms Inc and Alphabet Inc would be hard-pressed to clear antitrust review. It’s likely that Amazon.com Inc would too, since it is a competitor to TikTok Shop. Oracle, TikTok’s current data protection partner and former suitor, is saddled with debt from a past deal.

A standalone, private TikTok could also potentially work, purchased with a cocktail of cash and debt. Twitter’s takeover, which included about a third of debt in Elon Musk’s US$44 billion purchase, is a recent similar example.

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