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Walmart Joins Microsoft's Pursuit of TikTok -- 2nd Update

08/27/2020 | 04:50pm EST

By Sarah Nassauer, Georgia Wells and Cara Lombardo

The race to capture TikTok's U.S. operations took a sharp turn on Thursday, as retail giant Walmart Inc. said it is joining Microsoft Corp.'s bid for the popular video-sharing app after other deep-pocketed suitors dropped out of the running.

Walmart'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.

TikTok's Beijing-based owner ByteDance Ltd. is asking about $30 billion for the U.S. operations, but bidders thus far haven't been willing to meet that price, according to people familiar with the negotiations. By comparison, Twitter Inc. in recent weeks informally floated a bid closer to $10 billion as a part of a range of pricing and scenarios, said some of the people.

Microsoft's joint bid with Walmart is considered the front-runner, according to people familiar with the matter, while a second consortium including Oracle Corp. also remains in the running.

Google parent Alphabet Inc. was involved in talks as recently as earlier this week, according to people familiar with the matter. Those talks are now dead. Twitter's bid has also lost momentum, according to some of the people.

Tokyo-based tech investor SoftBank Group Corp. expressed interest in recent weeks in participating in a bid, but is no longer in the running, people familiar with the matter said. The Trump administration has said it wants TikTok's U.S. operations to be owned by an American company.

TikTok has been aiming to pick a bidder to enter exclusive negotiations and seal a deal as early as next week, according to people familiar with the deliberations.

Even as investors push for a deal, ByteDance founder Zhang Yiming is still not fully on board with selling his creation. Mr. Zhang has been frustrated by the U.S. demands and has told people he might abandon the sale process and live with the consequences from the Trump administration, according to people familiar with the matter.

The company is facing a mid-September deadline to sell its American operations, under an executive order issued by President Trump earlier this month. TikTok on Monday filed a lawsuit challenging the order.

TikTok, an app that shot to popularity with its videos of dancing and lip-syncing teenagers, has been downloaded more than two billion times since its launch, according to mobile-data research firm Sensor Tower.

The company will now proceed with deal negotiations without its high-profile American CEO, Kevin Mayer, who joined TikTok from Walt Disney Co. three months ago. Mr. Mayer resigned on Wednesday, saying the political environment had changed significantly since taking the job.

Walmart said it believes a potential partnership with Microsoft would address U.S. government concerns about TikTok. Unlike big tech companies that have been in the Trump administration's crosshairs, Walmart has close ties to the White House.

The retailer's chief executive, Doug McMillon, has traveled to the White House on several occasions, and Mr. Trump has praised Walmart and other big chains for helping with Covid-19 testing efforts during the pandemic.

Oracle's rival bid also claims White House connections. Larry Ellison, the company's co-founder, chairman and largest shareholder, earlier this year threw a fundraiser at his house for the president. Chief Executive Safra Catz also worked on the executive committee for the Trump transition team in 2016.

The Oracle bid is proceeding with several of ByteDance's existing investors, including Sequoia Capital, General Atlantic and Coatue Management LLC.

Walmart and Microsoft are already partners on several technology projects, with the retailer using Microsoft's cloud computing services, as they seek a counterweight to Amazon.com Inc.

"The way TikTok has integrated e-commerce and advertising capabilities in other markets is a clear benefit to creators and users in those markets," Walmart said in a statement.

Microsoft declined to comment but has previously said it was pursuing a deal for TikTok's U.S. operations and might invite other American investors.

Walmart's shares jumped more than 4% on the news in Thursday afternoon trading to near a record high, approaching a $400 billion market capitalization. The stock price has rallied this year as the big-box retailer has managed to operate throughout the pandemic. Demand from shoppers looking for groceries and household staples has led to surging sales and a jump in e-commerce revenue.

The world's biggest retailer by revenue has been ramping up its online business in recent years, paying $3.3 billion to acquire Jet.com in 2016 and striking a $16 billion deal two years later for a controlling stake in Flipkart, an Indian e-commerce company.

But Walmart, like Amazon, has also looked to move beyond its retail roots, by developing an online marketplace to sell a wider range of products from third-party sellers and smaller merchants. It has also sought to create its own digital advertising network. The company aims to use those services to generate new revenue streams beyond its supercenters, which currently account for most of its more than $500 billion in annual revenue.

Until now, Walmart has mostly used social media to advertise products. But the company has also begun to offer its own digital ad space and access to shopper data, mainly to its existing suppliers. An ownership stake in TikTok could allow Walmart to use the video platform to sell ads to its suppliers -- and potentially to sell its own products through the app.

--Miriam Gottfried, Rob Copeland, Liza Lin and Maureen Farrell contributed to this article.

Write to Sarah Nassauer at sarah.nassauer@wsj.com, Georgia Wells at Georgia.Wells@wsj.com and Cara Lombardo at cara.lombardo@wsj.com


Stocks mentioned in the article
ChangeLast1st jan.
ALPHABET INC. -0.19% 1727.62 Delayed Quote.-1.43%
MICROSOFT CORPORATION -0.17% 212.65 Delayed Quote.-4.23%
ORACLE CORPORATION 0.29% 61.78 Delayed Quote.-4.50%
SOFTBANK GROUP CORP. -0.60% 8518 End-of-day quote.5.71%
THE WALT DISNEY COMPANY -1.15% 171.44 Delayed Quote.-5.38%
WALMART INC. -1.59% 144.64 Delayed Quote.0.34%
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Financials (USD)
Sales 2021 552 B - -
Net income 2021 19 352 M - -
Net Debt 2021 44 086 M - -
P/E ratio 2021 20,7x
Yield 2021 1,51%
Capitalization 409 B 409 B -
EV / Sales 2021 0,82x
EV / Sales 2022 0,81x
Nbr of Employees 2 200 000
Free-Float 48,9%
Duration : Period :
Walmart Inc. Technical Analysis Chart | WMT | US9311421039 | MarketScreener
Technical analysis trends WALMART INC.
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus OUTPERFORM
Number of Analysts 37
Average target price 161,31 $
Last Close Price 144,64 $
Spread / Highest target 24,4%
Spread / Average Target 11,5%
Spread / Lowest Target -28,1%
EPS Revisions
Managers and Directors
C. Douglas McMillon President, Chief Executive Officer & Director
Gregory B. Penner Non-Executive Chairman
Dacona Smith Chief Operating Officer & Senior VP-Sam's Club
Brett M. Biggs Chief Financial Officer & Executive Vice President
Clay Johnson Enterprise Chief Information Officer & EVP
Sector and Competitors
1st jan.Capitalization (M$)
WALMART INC.0.34%409 228
SEVEN & I HOLDINGS CO., LTD.8.94%33 907