ByteDance relapses to unhealthy tech deal habit

A man holding a phone walks past a sign of Chinese company ByteDance’s app TikTok, known locally as Douyin, at the International Artificial Products Expo in Hangzhou, Zhejiang province, China October 18, 2019. Picture taken October 18, 2019. REUTERS/Stringer

HONG KONG, Aug 10 (Reuters Breakingviews) – ByteDance can’t seem to quit its unhealthy acquisition habit, and it’s not alone. The TikTok-owner has taken over a high-class women’s hospital chain for $1.5 billion, Bloomberg reports. Peers like Alibaba (9988.HK) and Tencent (0700.HK) have made similar forays into healthcare, with underwhelming results. Amid falling valuations and Beijing’s sustained pressure on technology companies, this relapse into off-piste dealmaking looks even more ill-advised.

The video-app owner’s unlikely target is Beijing-based Amcare Healthcare, which specializes in fertility, obstetrics, gynaecology and paediatrics. Catering to mothers is politically savvy in one respect: China’s plummeting birthrate read more is a rising concern among policymakers. The country’s 1.4 billion population may start shrinking next year, according to a July United Nations report.

But the sight of a viral app specialist buying a hospital chain raises eyebrows nonetheless. Bytedance already has a nascent health platform, Xiaohe, which offers online medical consultations that compete with similar apps from Alibaba and Tencent-backed WeDoctor. Unfortunately healthcare is heavily regulated – arguably even more than online content – and it is replete with sensitive user data.

Commercially speaking, the crowded market has not lived up to the hype about vast profits to be earned upgrading China’s rickety healthcare system. Alibaba Health Information Technology (0241.HK) and Ping An Healthcare Technology (1833.HK) have seen their shares fall over 60% over the past year. Earnings have been unpredictable on the back of fierce competition, uncertain regulations and changing business models despite a Covid-induced boom in tele-medicine. The latter, for example, switched focus to selling employee healthcare solutions for corporate customers and is not expected to be profitable in the next two years, per Refinitiv.

ByteDance’s core apps business looks a bit shaky. Online advertising is set to slow as the economy cools while new curbs on personal data and algorithms will bite. Crackdowns on online tutoring and video games have cramped the company’s expansion into adjacent markets. Shares of ByteDance have traded hands in private markets at valuations below $300 billion, representing a fall of at least 25% from just last year, according to Bloomberg. All that might explain why it is trying to surge into medical services, but the company has more pressing health priorities.

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CONTEXT NEWS

China’s ByteDance has taken control of private hospital chain Amcare Healthcare for $1.5 billion, Bloomberg reported on Aug. 9, citing people familiar with the deal.

The company, which owns video-apps TikTok and Douyin, bought a 17.6% stake in Amcare in 2021 via its Xiaohe healthcare-focused subsidiary, according to local media, and later increased its stake to 30%. Two Xiaohe units now own 100% of Amcare.

Amcare operates seven women’s and children’s hospitals and two outpatient clinics, as well as five post-partum confinement centers across China, according to its website.

Editing by Pete Sweeney and Katrina Hamlin

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