How ByteDance's CEO balked at selling TikTok's US business

ByteDance founder and CEO Yiming Zhang's decision to drop his pursuit of a sale of TikTok's U.S. operations to Microsoft Corp in favor of a partnership with Oracle Corp was the culmination of pressure from the Beijing-based firm's investors as it searched for a deal to appease the United States and China, according to people familiar with the deliberations.

China also got involved in the process last month, updating its export control rules to give it a say over the transfer of technology, such as TikTok's recommendation algorithm, to a foreign buyer. Chinese officials have said ByteDance should not be coerced by the United States into a deal. Concerned over ByteDance's lack of engagement, Microsoft asked the Chinese company whether it had lost out in the race for TikTok's U.S. business, one of the sources said. Microsoft also asked if it could change the deal structure to match Oracle, the source added.

ByteDance has worked feverishly in the last few days on a deal proposal that would allow the Chinese company to retain a minority stake in TikTok while addressing U.S. security concerns, the sources said. Zhang is referring to this deal in discussions with other ByteDance executives as a restructuring, the sources said. One of the sources called the proposed arrangement akin to a joint venture.

The proposal calls for the Committee on Foreign Investment in the United States , the U.S. government panel overseeing the deal talks, to approve board directors at TikTok U.S., as well as relationships with major vendors, the sources added. The arrangements would be similar to those CFIUS put in place when Lenovo acquired IBM's personal computer business in 2005 and SoftBank Group Corp acquired U.S. wireless carrier Sprint in 2013, according to the sources.

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