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WASHINGTON — President Trump said on Saturday that he had approved a deal between the Chinese-owned social media app TikTok and major American companies, an agreement that will delay the U.S. government’s threat to block the popular app in the United States over national security concerns.
The deal, which must still gain formal U.S. approval, would cede some control to Oracle, an American software maker, and Walmart, ultimately placing 53 percent equity in the service into the hands of American companies and investors, a person with knowledge of the matter said.
While that structure falls short of an all-out sale of TikTok, it is still a significant concession for ByteDance, TikTok’s Chinese owner — one that has apparently satisfied the administration’s concerns about China’s ability to harness data from users of the popular social media app. The Commerce Department, which planned to bar TikTok from U.S. app stores as of midnight Sunday, said that it would delay that plan for one week.
The deal capped weeks of drama over the fate of TikTok that underscored how much relations between the United States and China have deteriorated, with their race for technological superiority and mutual suspicions extending to a social media platform known for silly video clips and a trend-setting, mostly young user base of 100 million people in the United States.
Mr. Trump has increasingly taken aim at Chinese apps, including TikTok and WeChat, saying they pose a threat to American national security and threatening to ban them from the United States. The situation intensified in early August, when Mr. Trump issued an executive order essentially mandating that ByteDance strike a deal to sell the app’s U.S. operations by Sept. 20, or cease some commercial operations. A second executive order set a later deadline for ByteDance to fully divest from the product.
That decree prompted top officials, including Treasury Secretary Steven Mnuchin, to inject the U.S. government into private-sector discussions about a deal to transfer some control of TikTok to an American company.
The orders pushed ByteDance to hasten discussions that had already been underway with potential bidders about TikTok’s ownership structure. Microsoft, Walmart and Oracle were among those that entered talks about acquiring TikTok’s U.S. business.
“Threatening TikTok has been the most prominent step so far in a U.S. trajectory toward technology decoupling” with China, said Paul Gallant, an analyst at Cowen and Company. “I think it puts everybody in the U.S. tech sector on notice that they need to scrutinize even their seemingly innocuous connections to China.”
In a statement Saturday, TikTok said that Oracle and Walmart together would take up to a 20 percent stake in the new company, which will retain the TikTok name. The company, TikTok Global, will be based in the United States. Those investors include the U.S.-based companies General Atlantic, Coatue Management and Sequoia Capital. As a result, the majority of TikTok Global’s ownership will be controlled by U.S.-based entities.
Mr. Trump had previously said he would not be satisfied with a deal where ByteDance retained a majority stake in the company.
A group of additional investors — most of them based in Europe — would control 11 percent of the service, one of the people familiar with the discussions said. Chinese investors, primarily the ByteDance founder Zhang Yiming and its employees, would hold the rest, or about 36 percent. How control of the app is calculated would hinge in part on how existing non-Chinese investors in ByteDance were counted, a person familiar with the matter said this past week.
“I have given the deal my blessing,” Mr. Trump told reporters outside the White House on Saturday. “If they get it done that’s great, if they don’t that’s fine too.”
In a statement, Monica Crowley, a spokeswoman for the Treasury Department, said that the president had reviewed the deal, but that the administration’s formal approval of it was still pending.
“Approval of the transaction is subject to a closing with Oracle and Walmart and necessary documentation and conditions to be approved by CFIUS,” she said, referring to the Committee on Foreign Investment in the United States, the national security panel overseen by Mr. Mnuchin that is reviewing the transaction.
In his remarks outside the White House Saturday, the president suggested that the deal would fully address his administration’s national security concerns, saying that the “security will be 100 percent” and that the new companies would use a separate cloud from its Chinese parent.
He also incorrectly claimed that the new company would “have nothing to do with China.” Chinese investors will retain at least one-third of the new company’s stake.
“It’ll be a brand-new company,” Mr. Trump said. “It will have nothing to do with any outside land, any outside country.”
It remains to be seen if China would take any actions to try to block the sale of one of its most successful tech exports.
While Beijing has long banned American social media services, this is the first time that Washington has responded in kind. The United States has for decades embraced an open, largely unregulated vision of the internet. But in recent years, concerns about national security and geopolitics have led officials to bar Chinese technology from the networks, and now smartphones, used by Americans.
The deal constitutes a victory for Oracle, which is a close corporate ally of the president and his administration. Its top executives worked on Mr. Trump’s transition team, have supported his policy initiatives and have donated more than $150,000 to his re-election campaign.
Its founder, Larry Ellison, and Walmart’s chief executive, Doug McMillan, spoke with Mr. Trump about the deal twice on Friday, said people familiar with the matter.
In a statement, Safra Catz, Oracle’s chief executive, said the company was “100 percent confident in our ability to deliver a highly secure environment to TikTok and ensure data privacy to TikTok’s American users, and users throughout the world.”
Walmart did not immediately respond to a request for comment.
Source: The NY Times
Keyword: Trump Approves Deal Between Oracle and TikTok