OSLO/BEIJING (Reuters) - A $1.2 billion takeover of Opera Software by a group of Chinese internet firms fell through on Monday after failing to get regulatory approval in time, sending the Norwegian browser firm’s shares to a seven-month low.

A Logo of Qihoo 360 is seen in Nanjing, Jiangsu province, November 2, 2014. Picture taken November 2, 2014. REUTERS/China Daily

The deal needed a green light from the United States and China, and one firm in the Chinese consortium said U.S. privacy concerns would have led to an investigation into some of Opera’s products that risked delaying the acquisition for up to a year.

Opera and the Chinese group have instead come up with an alternative deal worth $600 million which strips out some products and services in a bid to overcome regulatory hurdles.

The so-called Kunqi consortium, which includes online and mobile games distributor Beijing Kunlun Tech Co and search and security business Qihoo 360 Technology Co, will now buy certain parts of Opera’s consumer business.

It will acquire Opera’s mobile phone and desktop computer browser business, its performance and privacy apps division, its technology licensing business, as well as its stake in Chinese joint venture nHorizon.

However, the consortium will no longer buy Opera’s advertising and marketing business, its TV operations, nor its game-related apps.

The hope is that the alternative deal will make it easier to win regulatory approval from U.S. authorities, one of the Chinese partners told Reuters on Monday.

“According to what we know, it was because of Opera’s other services, and involves very many users’ privacy. This would be extremely rigorously investigated during the U.S. government’s audit and probably would have delayed the entire acquisition process by six months to a year,” a Kunlun spokeswoman said.

“So we opted for a better method, and chose Opera’s core assets, namely the consumer business, as the target of the acquisition. That greatly accelerates the acquisition process,” she said in an emailed statement.

Opera declined to comment Kunlun’s statement to Reuters.

The acquisition was part of a complex of deals being done by the Chinese buyers seeking to join forces in their home market, which is dominated by giant rivals such as Alibaba and Tencent. Buying Opera will also help the group expand into emerging markets in Asia, Africa and elsewhere.

EXTRAORDINARY DIVIDEND

Shares in Opera, which had flagged potential regulatory issues last week, slumped as much as 17 percent but recovered to trade at 54.25 crowns by 1210 GMT, 11 percent higher than before the original deal was announced in February.

Earlier on Monday, Opera said the original deal was lacking regulatory approval, without saying whether it was awaiting the green light from China, the United States, or both.

The final deadline for the offer, and the deadline for approval by the Committee on Foreign Investment in the United States, were both on Friday.

“No regulators have said no. We have not received an answer within the agreed deadline,” Opera Chairman Sverre Munck told Reuters, adding that the parties could have postponed the deal but decided to pursue the alternative instead.

“A vast part of the investors are disappointed. We understand that, and we are also disappointed that the original offer didn’t go through,” said Munck.

“People had expected a payout of 71 crowns, they won’t get that. Instead, they will get an extraordinary dividend by autumn at some point,” he said, without giving a figure for the payout.

The hope is that the new deal, which has been approved by Opera’s board of directors, will close late in the third quarter. It is expected the proceeds will be used for a distribution to shareholders, share buyback and debt repayment.

“Since it will not repay all its net debt, but maybe reduce net debt by around half ... the expected distribution of one time dividends and share buy backs is likely to be between 25-30 crowns per share,” Norne Securities analyst Karl-Johan Molnes said.

Qihoo and the Kunqi consortium, which also includes Golden Brick Silk Road (Shenzhen) Equity Investment Fund and its Yonglian Investment affiliate, declined to comment. Chinese regulators did not immediately reply to a request for comment.

The U.S. Department of the Treasury, which handles media inquiries for the Committee on Foreign Investment in the United States, was not immediately reachable for comment outside regular office hours.