China's Kunlun Tech agrees to U.S. demand to sell Grindr gay dating app

By Echo Wang

(Reuters) - Chinese gaming company Beijing Kunlun Tech Co Ltd said on Monday it had agreed to a request by the Committee on Foreign Investment in the United States (CFIUS) to sell popular gay dating app Grindr, setting a June 2020 deadline to do so.

Kunlun's decision came after Reuters reported in March that CFIUS, an interagency government committee that scrutinizes acquisitions of U.S. companies for potential national security risks, had asked Kunlun to divest Grindr, whose database contains personal information such as a user's location, messages, and HIV status.

The development is a rare, high-profile example of CFIUS undoing an acquisition that has already been completed. Kunlun took over Grindr through two separate deals between 2016 and 2018 without submitting the acquisition for CFIUS review.

CFIUS has not disclosed its specific concerns. However, the United States has been increasingly scrutinizing app developers over the safety of personal data they handle, especially if some of it involves U.S. military or intelligence personnel.

Kunlun has already been working with investment bank Cowen Inc to solicit acquisition interest in Grindr, Reuters has reported.

Kunlun said in a regulatory filing it would shut down Grindr's China operations and would not send any sensitive user data to China, in an effort to address concerns over data privacy.

In addition, CFIUS has barred Kunlun from accessing Grindr's personal data and from sending any of Grindr's data to people or entities in China.

Kunlun also agreed to keep Grindr's headquarters in the United States, to put at least two U.S. citizens on its three-member board, and to subject its board to approval by CFIUS.

Kunlun acquired a majority stake in Grindr in 2016 for $93 million. It bought out the remainder of the company in 2018.

Its control of Grindr has fuelled 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 about how the app would protect users' privacy under its Chinese owner.

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

Founded in 2008 by Tsinghua University graduate Zhou Yahui, Kunlun also owns Xianlai Huyu, a Chinese mobile gaming company.

(Reporting by Echo Wang in New York; Editing by David Gregorio)