Oracle Corp. and Walmart Inc. have announced tentative approval from the government to acquire a 20% stake in the newly formed company TikTok Global, which would count Walmart’s Chief Executive Doug McMillon among its board members.
The new company, TikTok Global, will be majority owned by American investors, be based in the U.S. and will count Americans as four out of five board members.
“Upon creation of TikTok Global, Oracle/Walmart will make their investment and the TikTok Global shares will be distributed to their owners, Americans will be the majority and ByteDance will have no ownership in TikTok Global,” Ken Glueck, Oracle’s executive vice president, said in a statement sent to MarketWatch.
Walmart /zigman2/quotes/207374728/composite WMT -1.22% has tentatively agreed to purchase 7.5% of TikTok Global.
Oracle’s Generation 2 Cloud data centers will also be home to information about 100 million U.S. TikTok users.
Oracle /zigman2/quotes/202180826/composite ORCL -5.05% and Walmart say TikTok Global would IPO on a U.S. exchange in less than a year, the company will create more than 25,000 jobs, and pay more than $5 billion in tax dollars.
The two companies, along with a number of other organizations, including Coatue Management, a tech-focused investment firm, will also launch an educational initiative that aims to bring an online curriculum to children across the country.
Walmart is bringing e-commerce and other retail expertise to the table, including fulfillment and payments.
“This partnership will provide Walmart with an important way for us to expand our reach and serve omnichannel customers as well as grow our third-party marketplace, fulfillment and advertising businesses,” the company said in a statement.
When it was first announced that Walmart was involved in a bid for TikTok with Microsoft Corp. /zigman2/quotes/207732364/composite MSFT -1.55% , analysts said it was an effort from the retail giant to make inroads with the young consumers who populate the social media site.
Even as the deal moves forward with Oracle, Credit Suisse analysts agree, and say it could also help Walmart attract new brands.
“We believe Walmart’s evolving assortment has been an important structural change over the last two-to-three years,” analysts led by Seth Sigman said. “Data can help targeting, and ultimately increase Walmart’s power with vendors, as we have seen in recent years as well.”
Walmart announced a new private-label brand on Monday, Free Assembly, days after chief rival Amazon.com Inc. /zigman2/quotes/210331248/composite AMZN +0.57% launched Luxury Stores , a bid for high-end shoppers. Credit Suisse rates Walmart stock outperform with a $135 price target.
Walmart stock has gained 15.3% for 2020 to date while the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -2.13% is down 4.9% for the period.