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Grindr sold by Chinese owner after US national security concerns

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Via Financial Times

The Chinese owner of Grindr, the world’s most popular gay dating app, has reached a deal to sell the platform a year after US regulators forced the company into a disposal because of national security concerns.

Beijing Kunlun Tech, a gaming company, announced on Friday in a stock exchange filing that it had agreed to sell Grindr to San Vicente Acquisition for about $608.5m.

The sale brings to an end a year of uncertainty over the ownership of Grindr, and highlights the depth of US concern over the threat of Beijing using sensitive data harvested by its tech companies against US citizens. US regulators are still investigating TikTok, the Chinese short-video app, on similar grounds.

After acquiring the platform in a series of purchases starting in 2016, Kunlun announced a plan to list the unit in 2018.

But that was scuppered by the Committee on Foreign Investment in the United States (Cfius), the government’s investment watchdog, which last year forced Kunlun to sell Grindr. Kunlun said it signed a “National Security Agreement” with Cfius to dispose of the unit by the end of June 2020.

Cfius had feared that the Chinese government could use personal data given to the app by its 3.3m users to blackmail US citizens — for example over their sexual preferences, or HIV status. Grindr’s users may include US officials and military personnel. In response, Kunlun had promised it would not transfer any sensitive data from Grindr to China, and that it would stop its operations there, keeping its headquarters in the US.

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Last year, Kunlun looked set to revisit its old plans to list the company after Cfius dropped its opposition.

Cfius’s intervention in 2019 was a rare instance of a retrospective veto of a deal that had already been completed, coming three years after Kunlun had first acquired its majority stake in Grindr.

The valuation of the dating app has quadrupled in the past four years, from the $151m implied by Kunlun’s first purchase of a 61.53 per cent stake in the unit in 2016.

The sale of Grindr had the blessing of Cfius, according to two people briefed about the matter, and should be considered a done deal, although it will still need to be technically assessed by the committee.

It took several months to get the US government agencies that compose Cfius, which include the Treasury and the departments of defence, state, commerce and homeland security, to agree to the terms of the deal.

Several members of Congress, from both the Republican and Democratic sides, also put pressure on the foreign investment committee to make sure that adequate guarantees had been made as part of the sale.

Details of the discussions and negotiations with Cfius remain highly classified. However, Kunlun was not under threat of having its agreement blocked again by Cfius, said the people with those with direct information about the matter said.

Grindr made a net loss in 2018 of Rmb28.7m, and a profit of Rmb160m ($23m) in the first three quarters of 2019, the stock exchange filing revealed. Its total revenues in the first three quarters of 2019 were Rmb553m.

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Grindr’s senior management and core employees will continue to hold 1.41 per cent of the shares in their company after the transaction.

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