Tencent moves to acquire Manus as Beijing forces Meta to unwind $2 billion AI startup deal

Tencent in talks to acquire Manus following regulatory intervention

Tencent is negotiating to become the largest shareholder in Manus, the Chinese AI startup that Meta purchased for $2 billion in December 2024, only to be forced to unwind the deal months later1

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. The Chinese tech giant is working with a consortium of original investors to unwind Meta's acquisition at the same $2 billion valuation, marking one of the most dramatic examples of Beijing intervention in a concluded cross-border technology transaction5

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. While Tencent will take the largest stake, it will remain a minority shareholder, with Manus continuing to operate independently from Singapore rather than being absorbed into Tencent's business operations2

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Beijing blocks Meta's Manus acquisition citing national security

In April 2025, Chinese regulators ordered Meta to reverse its $2 billion acquisition of Manus, citing breaches of investment rules and describing the transaction as a "conspiratorial attempt to hollow out China's technology base"1

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. The regulatory intervention reflects Beijing's increasing protectiveness of its AI companies and experts, which it considers strategic assets in its heated rivalry with the United States1

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. Founders of Manus, including CEO Xiao Hong, have been restricted from leaving the country after being summoned for a meeting in Beijing2

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. The decision is particularly unusual because China rarely requires companies to reverse closed acquisitions, making this move a significant escalation in geopolitical tensions over AI technology5

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Singapore-washing raises red flags with Chinese authorities

Part of what drew regulatory scrutiny was Manus' relocation strategy. After raising $75 million in a funding round led by U.S. venture capital firm Benchmark in May 2024, the AI startup shut its China offices and shifted operations to Singapore without seeking approval from Chinese regulators5

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. This practice, known as Singapore-washing, involves Chinese technology companies moving their headquarters to Singapore while maintaining strong operational links with China5

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. The Manus case marks a turning point, sending a clear message that attempts to bypass national regulations will not be tolerated as the U.S.-China AI race intensifies5

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. The order to unwind the deal also serves as a warning to other Chinese technology companies against using Singapore as a staging post for eventual sales to U.S. buyers2

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Tencent largest shareholder position aligns with AI agent push

Tencent, which already has a longstanding relationship with Manus and its founder Xiao Hong, sees the AI startup as a natural fit for its expanding focus on agentic AI2

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. "Beyond foundation models, it has become increasingly evident that agentic AI represents a breakthrough use case," Tencent president Martin Lau said in the company's May earnings call. "Our platform inherently has many benefits of hosting AI agents"1

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. The company is testing an embedded agent in WeChat, the ubiquitous app used by China's 1.4 billion people for messaging, social media, ride-hailing, and payments2

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. Xiao was among the first external users invited to test the feature when Tencent rolled it out to a small group of experts for feedback2

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. Before founding Manus, Xiao's previous startup was a customer relationship management platform based on the WeChat ecosystem2

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Consortium of investors betting on independent growth trajectory

Most of Manus' existing investors, including Tencent, ZhenFund, and HSG (formerly known as Sequoia Capital China), are discussing backing a deal that would unwind Meta's acquisition2

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. However, some existing backers, including U.S. venture capital firm Benchmark, are unlikely to participate, underscoring how the startup's cap table is shifting from a mix of Chinese and American funding toward a predominantly domestic one2

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. Investors backing the buyout are betting Manus can continue growing independently and eventually list in Hong Kong, though any listing would probably require restructuring to satisfy Chinese regulators2

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. The discussions remain ongoing and could include new investors, with details yet to be finalized2

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AI agent technology drives impressive revenue growth

Manus reached annual recurring revenue of close to $500 million earlier this year, up sharply from around $100 million at the time of Meta's Manus acquisition1

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. The AI startup gained attention early last year after being described as China's answer to DeepSeek, having developed what it claims is the world's first general AI agent that autonomously works toward achieving a goal5

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. Unlike companies that build their own large language model infrastructure, Manus develops an agent framework that runs on top of existing Western language models5

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. Whether it can sustain that growth outside Meta's ecosystem remains uncertain, as the startup loses access to the distribution muscle that helped it expand so rapidly2

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China doubles down on protecting homegrown AI talent

The reversal marks Beijing's determination to prevent what it views as a brain drain of homegrown AI talent to American technology companies1

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. This aligns with China's five-year plan, which emphasizes technological self-reliance and treats AI experts as strategic assets1

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. AI experts working in private firms are now required to secure approval before traveling internationally1

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. U.S. tech giants have been investing billions of dollars to develop their AI models, with some even dangling hundred-million-dollar bonuses to hire AI experts—one AI founder claimed that Meta offered a $1.25 billion bonus1

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. Meta has already agreed to unwind the deal, separating Manus' operations internally and stopping data sharing, though a formal financial unwinding has yet to take place2

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