Meta to Unwind $2.5 Billion Manus Acquisition, Allow Co-Founders to Depart Amid China Ban Concerns

Meta Faces Complex Task in Unwinding $2.5 Billion Acquisition of Manus AI

Meta, the Mark Zuckerberg-led company, is planning to unwind its acquisition of AI startup Manus after the Chinese government banned the transaction on national security grounds, according to a new report by The Wall Street Journal. The report cites sources familiar with the matter, stating that the company had bought Manus AI last year for $2.5 billion and worked on integrating the company's technology into its systems.

The process of reversing the deal is expected to be complex, requiring Meta to disentangle operations, data, and technology that have already been combined. This includes stripping any previously transferred data or technology out of Meta's ecosystem. Meanwhile, a Bloomberg report had noted that Manus staff have been integrated into Meta, funds have been dispersed, and the startup's leadership has joined the company's AI division. Manus employees have also already transitioned to Meta's Singapore offices, while former stakeholders like Tencent, ZhenFund, and HongShan have also collected their payouts.

Timeline of Key Events

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According to the WSJ report, several former Manus investors in Asia, including Tencent, HSG, and ZhenFund, plan to cooperate if Meta goes ahead with its plan to unwind the deal. However, one of the major complications is that Manus's investors, including US-based venture capital firm Benchmark, have already received returns from the deal.

Chinese authorities have reportedly handed Meta and Manus a preliminary deadline of several weeks to completely unwind the acquisition and restore the startup's Chinese assets to their original state. If the two companies fail to fully rescind the deal, Beijing is reportedly considering imposing further penalties on both Meta and Manus.

The acquisition of Manus had angered Beijing, which began reviewing it shortly afterwards. In March, Manus AI co-founders Xiao Hong and Ji Yichao were called in by Chinese authorities to discuss the acquisition. They were subsequently barred from leaving the country pending an investigation. Prior to Monday's official ban, Meta had reportedly discussed letting the founders depart the company as a potential concession to appease Beijing. Meta has now acknowledged that it will have to let Xiao and Ji go as part of the formal unwinding process.

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Chinese authorities believe they have the authority to demand the deal be unwound because Beijing Butterfly Effect Technology remains a Chinese company. Chinese law dictates that any foreign investments that may carry a national-security risk could be subject to review by authorities.