Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The troubled private equity fund behind a controversial investment in Israeli spyware company NSO Group is bracing for a fresh €125mn hit from a separate deal involving a Romanian betting company.
The €1bn fund raised by defunct buyout group Novalpina Capital, which invested on behalf of Yorkshire public sector workers and British Gas employees, among others, has said it expects to make a “significant loss” on its investment in Maxbet “even in the best-case scenario”.
Maxbet was acquired in 2021 for €273mn with €75mn of equity from the fund, in a deal completed three months before investors voted to eject Novalpina’s co-founders Stephen Peel, Stefan Kowski and Bastian Lueken.
Court documents show the fund, now controlled by US-based Treo Asset Management, is seeking to offload the betting company in a “confidential sale process” and is preparing to accept a price that is at least €125mn below what it paid — although the actual loss to the fund will be lower.
The Maxbet deal underscores how investors who took a bet on a fund run by former dealmakers from top US buyout firm TPG have been saddled with losses after a series of difficult deals.
Public filings made by one of the fund’s biggest backers, the Oregon Public Employees Retirement System, show that it has delivered an internal rate of return — the private equity industry’s key measure of performance over time — of minus 15.3 per cent from its inception in 2017 to September last year.
Novalpina Capital started to unravel after controversy over NSO, the Israeli spyware company blacklisted by the US for its Pegasus hacking tool, which was the fund’s largest asset.
The fund has spent the past few years embroiled in court cases after investors ousted Novalpina Capital’s founders. They tasked US consultancy Berkeley Research Group with winding down the fund and returning cash, a responsibility that now lies with Treo, an asset manager founded by a number of former BRG directors.
NSO itself was taken over by creditors in 2023, before being returned to one of the spyware company’s founders.
US private credit giant Ares meanwhile seized control of the fund’s crown jewel, French drugmaker Laboratoire XO, in May 2022 after refusing to bless the change in the fund’s management. Ares struck a deal with BRG to hand back LXO the following month, paving the way for a sale to Stanley Capital later that year at a valuation of about €250mn including debt.
Treo and entities controlled by the fund have been locked in litigation in the UK, British Virgin Islands, Romania, Luxembourg and Cyprus, costing investors millions in legal fees.
As well as seeking to sell Maxbet, Treo is pursuing Novalpina Capital Limited and one of its co-founders for damages totalling €287mn in relation to the deal.
Treo claims that Novalpina Capital concealed due diligence documents that questioned the true owner of Maxbet leading up to the purchase in 2021, which would have prevented entities controlled by the fund from signing off on the investment. That allegation is being contested in London’s High Court.
Other litigation has already settled, including a contested claim that Maxbet’s seller had concealed the fact that it was owned by Russian-Israeli casino and real estate tycoon Mikhael Mirilashvili, while a London High Court judge in 2023 ruled against an entity controlled by the fund in a case about whether it had breached a loan agreement linked to the deal.
Additional reporting by Kaye Wiggins in Hong Kong
https://www.ft.com/content/c595709d-2b2d-4dc0-9726-5a606a9ebc34
