Private equity owner of spyware group NSO stripped of control of €1bn fund

Novalpina Capital LLP updates

The private equity firm that owns the military spyware manufacturer NSO Group has been stripped of control of its own fund after a dispute between its co-founders.

Investors in Novalpina Capital’s €1bn fund voted this month to seize control after a tense three-hour video call, people involved in the process said. The dramatic intervention leaves the ownership of the firm behind the spying software Pegasus hanging in the balance.

The fund owns Israel-based NSO as well as the Estonian gambling company Olympic Entertainment Group and the French pharmaceutical business Laboratoire X.O.

Its investors, which include public pension funds, have until August 6 to decide whether to liquidate the fund with a fire sale of its assets, or appoint a third party to take control of it.

A third party would be expected to return any unspent capital to the investors and sell the companies over a longer period, potentially for a higher price. If investors representing three-quarters of the fund’s value cannot agree, the fund will be liquidated.

The vote to strip Novalpina of control of the fund was the culmination of months of turmoil at the private equity firm amid disagreements between its co-founders, Stephen Peel, Bastian Lueken and Stefan Kowski, people involved in the process said.

At the meeting this month, each of the three had set out his position, after which investors concluded the men could not continue to run the fund together and should be removed from its operations, a person present said.

“Clearly something has gone very wrong in the relationship” between the firm’s co-founders, the person said, describing the meeting as “peculiar and painful”, but declining to give further details.

Peel declined to comment. Lueken, Kowski and NSO did not immediately respond to requests for comment.

NSO, the most controversial company owned by Novalpina, has been at the centre of several spying controversies over the past few years.

Most recently, its Pegasus spyware tool was linked to phones belonging to dozens of journalists, human rights activists and politicians, according to an investigation by a consortium of newspapers. The software, which requires an Israeli government licence for export because it is viewed as a weapon, turns phones into listening devices and enables access to their encrypted contents.

Stephen Peel, a former partner at TPG, resigned from the board of human rights group Global Witness in early 2019 after investing in NSO.

His wife Yana Peel resigned as chief executive of London’s Serpentine Galleries, which she had described as her “dream job”, over Novalpina’s links to NSO.

The investor rebellion was first reported by Sky News.

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