Exclusive: US pushes Grindr's Chinese owner to divest of online dating app – sources

(Reuters) – Chinese gaming company Beijing Kunlun Tech Co Ltd. is looking to sell Grindr LLC, the popular gay dating app that it has owned since 2016, after a US government national security panel has expresses its concerns, according to people close to the file. .

The Committee on Foreign Investment in the United States (CFIUS) has informed Kunlun that its Grindr property, based in West Hollywood, California, poses a risk to national security, said the two sources.

The specific concerns of CFIUS and the possible attempt to mitigate them have not been learned. The United States is increasingly examining application developers about the security of the personal data they manage, especially if some of them involve US military personnel or intelligence services.

Kunlun had said last August that it was preparing for an initial public offering (IPO) of Grindr. Following the intervention of the CFIUS, Kunlun is now particularly interested in the auction of Grindr, since the IPO would have kept Grindr under the control of Kunlun for a longer period, said the same sources .

Grindr has retained the investment bank Cowen Inc. to manage the sales process and is seeking acquisition interests from US investment firms and its competitors, according to the same sources.

This development represents a rare and prestigious example of CFIUS canceling an acquisition already completed. Kunlun took over Grindr under two separate agreements between 2016 and 2018 without presenting the acquisition for examination of the CFIUS, according to sources, making it vulnerable to such intervention.

The sources asked not to be identified because the case is confidential.

Kunlun representatives did not respond to requests for comment. Grindr and Cowen declined to comment. A spokesman for the US Treasury Department, who chairs the CFIUS, said the panel did not comment publicly on individual cases.

Grindr, which describes itself as the world's largest social networking application for gay, bisexual, transgender and queer people, had 27 million users in 2017. The company collects personal information submitted by its users , including the location, messages and cases, even the HIV status of someone, according to its privacy policy.

CFIUS intervention in Grindr case highlights focus on personal data security after blocking acquisitions of US money transfer company MoneyGram International Inc. and AppLovin mobile marketing company by Chinese bidders in the last two years.

CFIUS does not always reveal the reasons why it chooses to block an agreement with the companies involved, which could potentially reveal classified findings of US agencies, said Jason Waite, a partner at law firm Alston & Bird LLP, who focuses on the regulatory aspects of international relations. trade and investment.

"Personal data has become a major concern for CFIUS," Waite said.

The outcome of the Grindr agreement also highlights the pitfalls faced by Chinese acquirers of US companies seeking to bypass the CFIUS revision system, which relies primarily on voluntary bids.

Among the previous examples of the United States that ordered the divestment of a company after the purchaser had not yet requested the CFIUS review, include the acquisition by China National Aero-Technology Import and Export of the Seattle-based manufacturer of aircraft components Mamco in 1990, the sale by Ralls Corporation of four Oregon wind farms in 2012 and the sale by Ironshore Inc of Wright & Co, a roofing supplier of professional liability to US government employees, such as law enforcement officials and national security officials, at Starr Companies in 2016.

CONFIDENTIALITY ISSUES

Kunlun acquired a majority stake in Grindr in 2016 for $ 93 million. He bought the rest of the company in 2018.

Grindr's founder and CEO, Joel Simkhai, resigned in 2018 after Kunlun bought the remaining stake in the company.

Kunlun's control of Grindr fueled the concerns of privacy advocates in the United States. US Senators Edward Markey and Richard Blumenthal sent a letter to Grindr last year asking for answers on how the application would protect the privacy of users owned by its Chinese owner.

Kunlun is one of China's largest mobile gaming companies. It was part of a buyout consortium that acquired the Norwegian Internet Navigation Company Opera Ltd for $ 600 million in 2016.

Founded in 2008 by Zhou Yahui, a graduate of Tsinghua University, Kunlun also owns Qudian Inc, a Chinese consumer credit provider, and Xianlai Huyu, a Chinese mobile phone gaming company.