Little-Known Investment Firm Centricus Circles TikTok With Long-Shot Bid

(WSJ) A low-profile investment firm is trying to entice the head of TikTok’s parent company with a long-shot alternative bid, as the popular video-sharing app remains caught in a standoff between the U.S. and China.

London-based Centricus Asset Management Ltd. has revised an offer several times in recent weeks based on feedback from Zhang Yiming, CEO of TikTok parent ByteDance Ltd., and his advisers, according to people familiar with the discussions, a copy of the bid, and other documents pertaining to the offer viewed by The Wall Street Journal.

The bid’s architects are positioning it as a backup to a deal already on the table led by Oracle Corp., which China’s ByteDance struck to appease the U.S. government and which was preliminarily approved by President Trump last month. The U.S. has called the app a national security concern.

Mr. Trump has said that he wants TikTok’s U.S. operations owned by Americans. Centricus says in its bid it will create a new holding company in a jurisdiction that is acceptable to the U.S. and China. 

People close to Centricus say they see the firm’s odds of success as low. Centricus executives believe that if the Chinese government ultimately blocks the Oracle deal, their bid could be seen as a potential middle path, one that preserves value for the existing investors and satisfies U.S. concerns that TikTok’s data not be in Chinese hands, while also preventing an American takeover of one of China’s most successful tech companies. Centricus also said in its bid that it is open to the participation of existing investors and American companies.

Some senior officials in both the U.S. and China are believed to be opposed to the existing Oracle deal, and there is no guarantee it will ultimately be approved by either Washington or Beijing. 

Centricus, which helped set up SoftBank Group Corp.’s $100 billion Vision Fund, says in the bid it has lined up international investors and American companies to purchase the stake in ByteDance and to help oversee the app’s operations in the U.S. and abroad.

The Centricus bid is “structured to allow the participation of other financial investors and technology partners, and so might incorporate any of the other options ByteDance is considering today,” a spokesman said in a statement. “We are patient and understand this will be a process that ByteDance will undertake as it evaluates the various options.”

A ByteDance spokesman said that the company has received a number of unsolicited inquiries related to TikTok. “We are not and have not been in any discussions with Centricus regarding TikTok,” he said. “Any claims to the contrary are frankly not credible.” The company declined to make Mr. Zhang available for comment.

The Journal has reviewed correspondence showing Mr. Zhang has communicated about the bid with Centricus advisers in China. The Journal has also reviewed formal bid documents, which were sent over WeChat to Mr. Zhang.

Centricus hired China-connected advisers and a Beijing-based partner of the law firm King & Wood Mallesons to represent their bid in discussions with Mr. Zhang and one of his lieutenants, according to the people familiar with the bid and other documents. A partner for King & Wood said the matter is “private and confidential.”

The backchannel discussions highlight the lingering uncertainty around TikTok, the subject of a global sweepstake kicked off by Mr. Trump’s insistence that it be sold to a U.S. company to address his fear that the Chinese government could gain access to TikTok’s user data. TikTok has said it wouldn’t hand over any data. TikTok held talks over the past two months with some of the world’s biggest tech and investment firms about deals that would keep it from being shut out of the U.S. market.

Some people close to the talks believe it is possible there won’t be a resolution on either side before the U.S. presidential election on Nov. 3. The outcome of that election could also reset the discussions. Democratic nominee Joe Biden hasn’t made clear his position on TikTok.

How China responds to the Oracle deal remains a wild card, but local media has been sharply critical of the idea of ceding such a prized asset to American control.

The hit video-sharing app has been downloaded 2 billion times globally in less than two years, and has roughly 50 million daily users in the U.S.

When Bloomberg reported on the Centricus bid in late August, TikTok publicly brushed it off. Since then, Centricus has revised its bid into two offers: The main one is for the entirety of TikTok, at a valuation of $50 billion, with the Centricus investors paying $25 billion for a 50% ownership stake, documents show.

The other is for TikTok’s operations in the U.S., Canada, India, Australia and New Zealand, valued at $20 billion with Centricus investors also taking a 50% stake, the documents show.

The numbers were a starting point for discussions over either bid, a person familiar with the bid said.

Triller, TikTok’s much smaller U.S. rival, is expected to play a role in both Centricus proposals, people familiar with the matter say—although it isn’t formally mentioned in the bid viewed by the Journal.

The idea to make a play for TikTok came in August from one of Triller’s owners, the former movie-studio executive Ryan Kavanaugh, those people said. Centricus knows Triller because it has looked at investing in the app over the last year, these people say.

Bobby Sarnevesht, a co-owner of Triller, said in a statement that he believes the bid “meets both the U.S. and Chinese government criteria while maximizing value for the ByteDance shareholders.”

Centricus, founded in 2016, is a London-based investment and advisory firm run by former Deutsche Bank executives, with about $30 billion in assets under management.

The company has relationships with investors across the world, including several sovereign-wealth funds, but it is unclear who is backing its TikTok bid.

Centricus, leveraging its connections in China, went directly to Mr. Zhang at ByteDance with its then-$20 billion bid at the end of August, according to the people familiar with the negotiations. That move bypassed the more formal process that Oracle and Microsoft were pursuing in the U.S.

Source: Wall Street Journal by Kirsten Grind, Bradley Hope and Georgia Wells

Little-Known Investment Firm Centricus Circles TikTok With Long-Shot Bid Little-Known Investment Firm Centricus Circles TikTok With Long-Shot Bid Reviewed by TechCO on 10/08/2020 Rating: 5

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