Mubadala Proposal to Sell Insurtech Startup Wefox Opposed by Founders

Mubadala Investment Co. has proposed selling troubled insurance tech startup Wefox Holding AG to UK insurance broker Ardonagh Group Ltd. in a deal opposed by the German firm’s founders.

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 more than €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.

Mubadala, which has $300 billion in assets under management, has become increasingly assertive in some of the startups it funded when low rates helped fuel a boom in venture capital investments. At Turkish grocery delivery business Getir, where it is also the biggest investor, Mubadala pushed for changes to the board and a revamp of its strategy earlier this year.

Wefox’s founders and some early investors oppose the deal as it would put them at risk of losing their entire investment, 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 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 more than 2 million customers, into two. Ardonagh would take over the core of the company, potentially offering some benefits to investors 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.

Ardonagh is partly owned by a subsidiary of the Abu Dhabi Investment Authority, the emirate’s largest sovereign wealth fund.

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 twice what 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.

The reelection of Wefox Chief Executive Officer Mark Hartigan and board member Helen Heslop to the company’s board of independent directors is also on the agenda – a move some investors claim violates a shareholder agreement, according to the documents seen by Bloomberg.

In 2023, Wefox posted revenues of €739 million. Adjusted earnings before interest, taxes, depreciation and amortization were a loss of €72 million, according to a company presentation seen by Bloomberg.

In the first four months of 2024, revenues were up 33% versus the same period last year to €446 million, while the adjusted earnings loss improved to €17 million, according to the documents.

Photograph: Signage for Mubadala at the company’s pavilion at the Dubai Air Show in Dubai, United Arab Emirates, on Monday, Nov. 13, 2023. Photo credit: Christopher Pike/Bloomberg