Mubadala Favors Selling Fintech Wefox Against Founders’ Wishes
(Bloomberg) — Mubadala Investment Co. has proposed selling troubled insurance tech startup Wefox to UK insurance broker Ardonagh Group Ltd. in a deal opposed by the German firm’s founders.
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The Abu Dhabi sovereign wealth fund has told Wefox shareholders it expects an offer from Ardonagh that would give the German firm an enterprise value of as much as €550 million ($595 million), according to a presentation from Mubadala that was seen by Bloomberg. Wefox was valued at $4.5 billion in a Mubadala-led funding round two years ago.
The Berlin-based company lost over €100 million last year and is now facing as much as €70 million in fresh capital needs through the end of the current year, according to the Mubadala presentation, which was addressed to the company’s key shareholders including Chrysalis Investments and Target Global.
Wefox’s founders and some early investors oppose the deal as it would put them at risk of losing their entire investment, and they have fielded an alternative one, according to people familiar with the situation. Instead of a sale, they’re proposing a new funding round by existing investors, the people said, asking not to be identified because the talks are private.
Chrysalis and Target support the alternative deal put forward by the Wefox founders, the people said. Chrysalis is working on a term sheet for a €50 million financing round, in which it would participate with €15 million, according to a separate Wefox presentation seen by Bloomberg.
Representatives for Mubadala, Wefox, Ardonagh, Target and Chrysalis declined to comment.
The deal proposed by Mubadala would split Wefox, which operates in eight countries and has over 2 million customers, into two. Ardonagh would take over the core of the company and offer some benefits if Ardonagh’s shares gain value. A separate firm consisting of Wefox’s tech platform and Swiss business would be set up and owned by early investors and shareholders.
The plan would leave early shareholders at a significant risk of losing their entire investment unless the new company were to become very profitable.
By contrast, investors that only joined Wefox through the 2022 funding round could end up getting paid out more than they invested thanks to contractual clauses, known as liquidation preferences, that put them ahead of other shareholders in the payout order in the case of a sale.
The proposals are likely to be discussed at an extraordinary meeting of Wefox’s shareholders that’s scheduled for June 28, according to the documents seen by Bloomberg.
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