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Exclusive: US pushes the Chinese owner of Grindr to divest the dating app resources

(Reuters) – the Chinese gaming company Beijing Kunlun Tech Co Ltd is looking to sell Grindr LLC, the popular gay dating app and has since 2016, after the U.S. government national security panel raised concerns about the property, according to people familiar with the matter.

FILE PHOTO: An unknown man with a smart phone walks through the Canary Wharf London underground station and the financial district in the evening light in London, great Britain, September 28, 2018. REUTERS/Russell Boyce/File Photo

The Committee on Foreign Investment in the United States (exhorting cfius) has informed Kunlun that the property of West Hollywood, California on the basis of Grindr poses a national security risk, the two sources said.

Exhorting cfius’ with specific questions and an attempt was made to reduce them can not be learned. The United States is increasingly critical of app developers about the security of the personal data they handle, especially if some of the going to be the AMERICAN military or intelligence personnel.

Kunlun had said last August it was the preparation for an initial public offering (IPO) of Grindr. As a result of exhorting cfius’ intervention, Kunlun has now shifted its focus to a auction to sell Grindr do, given the fact that the IPO would have kept Grindr under the Kunlun, the control for a longer period of time, the sources said.

Grindr has hired investment bank Cowen Inc to handle the sale process, and is soliciting acquisition interest from US investors, as well as Grindr’s competitors, according to the sources.

The development represents a rare, high-profile example of exhorting cfius to undo a acquisition that has already been completed. Kunlun took Grindr by means of two separate transactions between 2016 and 2018, without submitting the acquisition for exhorting cfius review, according to the sources, making it vulnerable to such intervention.

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

Kunlun representatives did not respond to requests for comment. Grindr and Cowen declined to comment. A spokesman of the US Ministry of finance, who chairs exhorting cfius, said that the panel is not publicly comment on individual cases.

Grindr, which describes itself as the world’s largest social network app for gay, bisexual, transgender and queer people, had 27 million users by 2017. The company collects personal information provided by the users, including a person, location, messages, and in some cases even one’s HIV-status, according to its privacy policy.

Exhorting cfius’ intervention in the Grindr deal underlined its focus on the protection of personal data, after it will be blocked by the takeover of the US money transfer company MoneyGram International Inc and mobile marketing Use by Chinese bidders in the past two years.

Exhorting cfius does not always reveal the reasons choose to make a deal for the companies involved, as this could reveal classified conclusions by U.S. authorities, said Jason Waite, a partner at law firm Alston & Bird LLP focusing on the administrative aspects of international trade and investment.

“Personal data has emerged as one of the main concern of exhorting cfius,” Waite said.

The unraveling of the Grindr deal also highlights the pitfalls facing Chinese buyers of AMERICAN companies that work around exhorting cfius review system, that is based mostly on a voluntary deal submissions.

Earlier examples of the AMERICAN order of the sale of a company after the acquirer does not file for exhorting cfius to the assessment of China National Aero-Technology Import and Export Corporation’s acquisition of Seattle-based aircraft component maker Mamco in 1990, Ralls Corporation, the sale of four wind farms in Oregon in 2012, and Ironshore Inc. is the sale of Wright & Co., a provider of professional liability coverage for employees of the U.S. government, such as the staff of the law enforcement and national security officials, to Starr Companies in 2016.

PRIVACY

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

Grindr’s founder and chief executive officer, Joel Simkhai, stepped in 2018 after Kunlun bought the remaining stake in the company.

Kunlun the control of Grindr has led to concerns among privacy advocates in the United States. U.S. senators Edward Markey and Richard Blumenthal sent a letter to Grindr last year, demanding answers with regard to how the app would protect the privacy of users under the Chinese owner.

Kunlun is one of China’s biggest mobile gaming companies. It was part of a consortium buy-out that acquired the Norwegian internet browser business Opera Ltd for $600 million in 2016.

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

Reporting by Carl O’donnell, Liana B. Baker and Echo Wang in New York; Editing by Greg Roumeliotis and Lisa Shumaker

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