Meta has declined to confirm the validity of the report.

Meta is reportedly preparing to undo its $2bn acquisition of Manus after the Chinese government blocked the deal, citing national security.

The Wall Street Journal (WSJ) was the first to report on the story. Meta declined to confirm the validity of the report.

Reversing the acquisition is going to be difficult for Meta, which has already integrated Manus employees, executives and technology into its own.

Investors, including Tencent Holdings, ZhenFund and Hongshan, have also reportedly received their proceeds from the acquisition.

According to WSJ’s report, Beijing has given the two companies a deadline of several weeks to fully undo the deal and restore Manus’ Chinese assets to their original state.

This would include removing any data or technology transferred from Manus to Meta. China may also consider penalising Manus and Meta is the deal isn’t fully reversed.

Manus is headquartered in Singapore, but has a Chinese parent company called Butterfly Effect Technology. Meta acquired the company after a $75m funding round last April that valued it at $500m.

With the acquisition, Meta had gained the ability to operate and sell Manus’ services, as well as integrate them into its own products.

In February, Manus launched ‘Manus Agents’, which debuted on Telegram before expanding to WhatsApp shortly after. It is unclear how China’s decision would affect Manus Agents on WhatsApp.

Yesterday (27 April), Meta had told SiliconRepublic.com that the “transaction complied fully with applicable law”. The company added that it anticipated an “appropriate resolution” to the matter.

Meanwhile, several former Manus investors have planned to cooperate if Meta goes ahead to unwind the deal, WSJ added.

China’s decision throws a wrench on Meta’s massive AI plans to play catch-up with its Big Tech competitors. The company has spent billions to acquire businesses, hire expensive executives and realign its priorities around AI. It has a planned spending budget of $135bn this year, with much of it going towards its AI efforts.

The company is also cutting costs by laying off 10pc of its global workforce, which comes to around 8,000 workers. In January, CEO Mark Zuckerberg said that AI and smaller teams are capable of handling projects that once required bigger teams.

China launched an investigation shortly after the Meta acquisition to determine whether it violated the country’s laws on technology exports and outbound investment. According to the rules, China needs to approve the export of certain technologies, including AI.

Recent reports also suggest that Chinese agencies are warning the country’s key AI firms against accepting capital from US origins.

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