CFIUS Filing in Mitigation: Beijing Kunlun Wanwei Technology Co. and Grindr Inc.
Acquirer: Beijing Kunlun Wanwei Technology Co., Ltd. (China)
Acquired: Grindr Inc.
Value: US$245 million
Industry: Software; Information Services
On May 13, 2019, Beijing Kunlun Wanwei Technology Co., Ltd. (Kunlun), a Chinese social networking and mobile gaming company − listed on the Shenzhen Stock Exchange (stock code: 300418) − announced that on May 9, 2019, it signed a “National Security Agreement” with CFIUS concerning its recently completed acquisition of Los Angeles-based Grindr Inc, the largest social networking app for gay, bi, trans, and queer people. (Beijing Kunlun Wanwei Technology Co., Ltd. Press Release, “Announcement on Signing a Major Agreement”, May 13, 2019.) Kunlun stated that CFIUS raised “concerns about threats to U.S. national security” in its 2018 Annual report. (Beijing Kunlun Wanwei Technology Co., Ltd. 2018 Annual Report, April 12, 2019, SZSE Filing, machine translation of Chinese language original.)
The Kunlun press release announcing the National Security Agreement with CFIUS described the following commitments that Kunlun must take under the National Security Agreement (Beijing Kunlun Wanwei Technology Co., Ltd. Press Release, “Announcement on Signing a Major Agreement”, May 13, 2019, quotations are machine translations of Chinese language original.):
“[d]ata access restrictions,” prohibiting Kunlun personnel from accessing “relevant Grindr sensitive data”
“Governance” obligations to keep Grindr operations and headquarters in the United States and to have three “CFIUS-approved personnel” on the Grindr Board of Directors, one from Kunlun; one to be an independent director, US citizen, with experience in mobile application technology; and one to be another US citizen with US security expertise and a US security clearance, who will serve as the “security director”
“Grindr’s share sale” requiring Kunlun, prior to June 30, 2020, to “sell its . . . 100% stake in Grindr. If the company fails to complete the sale of Grindr before the . . . deadline, the [CFIUS Monitoring Agencies] ha[ve] the right to ask Kunlun to find a suitable trustee and sign a trust agreement . . . .”
Background: Kunlun acquired 61.53% of Grindr for US$93 million on January 8, 2016, and recently acquired the remaining 38.47% ownership of Grindr for US$152 million on January 5, 2018. (See Beijing Kunlun Wanwei Technology Co., Ltd. 2016 Annual Report, April 25, 2017, SZSE Filing; and Beijing Kunlun Wanwei Technology Co., Ltd. First Quarter Report for 2018, April 27, 2018, SZSE Filing.)