President Donald Trump’s repeated attempts at popularising “Infrastructure Week” have failed to update bridges or highways. Instead he has given us “financial engineering day”. On Tuesday, Oracle confirmed that it had a complex deal in place to partner with TikTok. What started out in August as an exciting $50bn corporate acquisition ended with a whimper, with Oracle emerging as something called a “trusted technology partner”.
What was intended as a bold effort to keep user data away from an allegedly hostile China has become a Rube Goldberg/Heath Robinson type of transaction. It appears to be an overly elaborate affair to keep the White House happy. The Trump administration has now intervened at least three times in high profile corporate deal situations under the guise of the public interest of Americans: AT&T/Time Warner and Qualcomm/Broadcom are the others.
Under the new structure, the global TikTok will be based in the US, with Oracle — a company close to Mr Trump — buying in as a minority shareholder (alongside possibly Walmart as well). Its majority shareholder remains China’s ByteDance, which counts American VC firms like Sequoia and General Atlantic as investors. The latter two could have lost money if ByteDance was forced out. The new entity is meant to be run at arms-length from ByteDance, and the crucial TikTok algorithm will remain in China.
Who owns what percentage of which TikTok entity, and which assets and revenues are ascribed to those respective entities, remain unclear. US data is supposed to stay within America under the control of Oracle. The deal still requires final US approval.
US agencies typically take the lead in examining companies and transactions. But in the TikTok and Qualcomm/Broadcom cases, where the president himself issued an order to block that combination, the executive branch of the government has haphazardly thrusted itself into a complex situation. Ultimate policy outcomes are thereby tainted, threatening the US’s key competitive strength: the rule, and predictability, of law.
Unfortunately, the stigma of government meddling in deals has faded recently. France’s LVMH cited a government edict to help it escape its $16bn acquisition of Tiffany. The “art of the deal” has taken a whole new meaning.
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