Grindr has hired investment bank Cowen to handle the sale process, and is soliciting acquisition interest from U.S. investment firms, as well as Grindr's competitors, according to the sources.
The development represents 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, according to the sources, making it vulnerable to such an 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 for the U.S. Department of the Treasury, which chairs CFIUS, said the panel does not comment publicly on individual cases.
CFIUS' intervention in the Grindr deal underscores its focus on the safety of personal data, after it blocked the acquisitions of U.S. money transfer company MoneyGram International and mobile marketing firm AppLovin by Chinese bidders in the last two years.
CFIUS does not always reveal the reasons it chooses to block a deal to the companies involved, as doing so could potentially reveal classified conclusions by U.S. agencies, said Jason Waite, a partner at law firm Alston & Bird LLP focusing on the regulatory aspects of international trade and investment.
"Personal data has emerged as a mainstream concern of CFIUS," Waite said.
The unraveling of the Grindr deal also highlights the pitfalls facing Chinese acquirers of U.S. companies seeking to bypass the CFIUS review system, which is based mostly on voluntary deal submissions.
Previous examples of the U.S. ordering the divestment of a company after the acquirer did not file for CFIUS review include China National Aero-Technology Import and Export's acquisition of Seattle-based aircraft component maker Mamco in 1990, Ralls Corp.'s divestment of four wind farms in Oregon in 2012, and Ironshore's sale of Wright & Co., a provider of professional liability coverage to U.S. government employees such as law enforcement personnel and national security officials, to Starr Cos. in 2016.