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Mubadala Proposes Sale of Troubled Wefox to Ardonagh, Sparking Founder Opposition
Mubadala Investment Co. has suggested selling the beleaguered insurance tech startup Wefox Holding AG to UK insurance broker Ardonagh Group Ltd., a move opposed by the German firm's founders. This proposition aims to rescue Wefox from its financial troubles, as evidenced by the Abu Dhabi sovereign wealth fund's expectation of an offer that would value Wefox at up to €550 million ($595 million). In stark contrast, Wefox was valued at €4.5 billion during a Mubadala-led funding round two years prior.
The Berlin-based Wefox, which incurred losses exceeding €100 million last year, now faces the need for an additional €70 million by the end of this year. Mubadala, managing $300 billion in assets, has become more assertive with its startup investments, influenced by past venture capital booms. This trend is also visible in its involvement with other companies, such as the Turkish grocery delivery firm Getir, where Mubadala instigated board changes and strategic revamps earlier this year.
Wefox's founders, along with some early investors, resist the sale to Ardonagh, fearing the loss of their entire investment. Instead, they propose a new funding round involving existing investors. Chrysalis Investments and Target Global, significant shareholders in Wefox, support this alternative funding plan. Chrysalis is even preparing a term sheet for a €50 million financing round, committing €15 million from its side.
Mubadala's proposed deal entails splitting Wefox into two entities: Ardonagh would take over the core business, potentially providing value to existing investors through Ardonagh's potential future benefits. A separate company, comprising Wefox's tech platform and Swiss operations, would be established and owned by early investors. However, this plan risks early shareholders losing their investments unless the new entity becomes highly profitable. Meanwhile, investors from the 2022 funding round might secure double their investment due to liquidation preferences that prioritize their payout in any sale scenario.
Upcoming Shareholder Meeting
These proposals are set to be discussed at an extraordinary shareholder meeting on June 28. Key agenda items include the reelection of Wefox CEO Mark Hartigan and board member Helen Heslop—an initiative some investors argue breaches a shareholder agreement.
Wefox's Financial Performance
Despite recent challenges, Wefox posted revenues of €739 million in 2023 but faced adjusted earnings losses before interest, taxes, depreciation, and amortization of €72 million. However, early 2024 figures show a 33% revenue increase over the same period last year, reaching €446 million, with adjusted earnings losses reduced to €17 million.
