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From spyware to landmine clearance: how Novalpina Capital fell apart

The private equity firm behind Israeli spyware maker NSO Group held talks to buy a landmine clearance company that works for Saudi Arabia in Yemen — a divisive deal that contributed to the group’s unravelling.

Novalpina executives considered acquiring UK-based SafeLane Global in late 2019 and early 2020, according to six people familiar with the matter and emails between the co-founders.

At the time, Novalpina was coming under criticism from human rights groups for its fund’s investment in NSO, whose software has been used by nation states to spy on political opponents, activists and journalists. NSO has since been sued by Apple and WhatsApp, while the US has added it to a trade blacklist.

The acquisition of SafeLane was pushed by Novalpina’s co-founder Stephen Peel, a former British Olympic rower who had previously worked at Goldman Sachs and TPG.

But he met stiff resistance from his two co-founders Bastian Lueken and Stefan Kowski, widening a rift between the men which ultimately led to investors seizing control of the private equity firm last year.

Kowski and Lueken believed using some of Novalpina’s €1bn fund, whose investors include the pension pots of Yorkshire public sector workers and British Gas employees, would add to the embattled firm’s reputational risk.

In an email to 18 colleagues in February 2020, later submitted to a Luxembourg court as part of a legal dispute, Lueken said the proposed SafeLane deal, known as Project Matisse, did not appear “quite right”.

He expressed concern that SafeLane could be criticised for “making money in war zones” and “putting locals in harms [sic] way”. That “may be a harsh way of articulating the story but given the flak were [sic] already getting this may well be how this comes out in the media”, Lueken said in the email.

Peel told Kowski he did not want to work at a firm where colleagues stopped him from doing deals.

In an email, Peel told Kowski he was “quite upset that you somehow believe your investment judgment trumps mine” and that “if you and I cannot agree on this, we should face up to it that there is not a future for the firm”. Novalpina ultimately did not make a binding bid for SafeLane.

Rather than further jeopardise the public perception of Novalpina, Peel appeared to believe the investment would help the firm. He had a “romantic picture” of SafeLane and associated it “with the image of Lady Diana” walking through an active minefield in Angola, in the view of one person close to the matter. After the criticism over NSO, the person said, “the association with a humanitarian cause was seen as a really good thing”.

The NSO Group logo on a building
NSO Group’s software has been used by nation states to spy on political opponents, activists and journalists © Menahem Kahana/AFP/Getty Images

In response to a summary of the FT’s reporting and a request for comment, Peel said: “These fictions do not merit comment.”

Kowski and Lueken declined to comment.

Lueken’s concerns about SafeLane “making money in war zones” were rejected by the company’s chief executive Adam Ainsworth, a former officer in the British Army.

“It seems counter-intuitive for Bastian Lueken to express a view such as this given the nature of NSO’s work,” Ainsworth told the FT.

NSO declined to comment.

SafeLane “is just doing humanitarian work”, Ainsworth said. “We’re just picking up ordnance.”

He added: “If you’ve, god forbid, ever been somewhere where you’ve seen some kids playing catch with a cluster bomb and see what happens when they drop it — if you can make sure that cluster bomb isn’t there for them to play catch with, you genuinely can make lives better.”

In a February 2020 email about the SafeLane deal submitted in the court dispute between the three men, Peel told Kowski, “I blame myself for trying to set up a governance that was egalitarian” and added, “I am saddened but now accept that is where we are”.

One person with knowledge of the dispute said that one of Peel’s colleagues was satisfied with the company’s safety record and compliance and corporate conduct policies, and believed Lueken and Kowski were opposing too many deals with insufficient reason.

Peel seemed to take “criticism of the deal . . . as an effort to undermine him personally”, one person close to the matter said. “That’s where the consequences [for] the relationship between the founders began to show.”

Diana, Princess of Wales, visits a minefield in Angola in 1997
Diana, Princess of Wales, visits a minefield in Angola in 1997 © Tim Graham Photo Library/Getty Images

After the SafeLane deal was abandoned, Novalpina continued to pursue other deals, buying the French pharmaceuticals business Laboratoire XO and Romanian gambling operator MaxBet, using its fund.

But the rift between the co-founders proved irreparable. Lueken and Kowski wrote to Novalpina’s investors last June, shortly before the trio were stripped of control, saying Peel had proposed to wind up the firm unless decisions were taken that they thought were “inappropriate for our fund”.

SafeLane, which has worked in more than 60 countries and counts Denmark’s former prime minister Helle Thorning-Schmidt as a board member, is working on Project Masam, a Saudi project to clear landmines in Yemen.

The Yemen project was SafeLane’s largest and most profitable contract at the time Novalpina considered the deal, two people with knowledge of the matter said.

The project has cleared more than 300,000 mines, improvised explosive devices and other items of unexploded ordnance in its first four years, the company said.

Twenty-eight people working on the Yemen project for SafeLane have died in that time, according to the company, of which 10 died in demining incidents and 18 in security incidents.

The research group Mine Action Review said in a report in October that the project “has not undergone independent investigation and verification to inform the sector on circumstances surrounding its casualties, thought to be among the highest recorded by single project”.

Ainsworth said Mine Action Review’s comments were “anecdotal” and the organisation had not visited the project.

Yemen is contaminated with mines from a series of conflicts since the 1960s. Saudi Arabia intervened militarily in Yemen’s civil war in 2015 when it led an Arab coalition against Iranian-aligned Houthi rebels. The UN says the conflict has triggered the world’s worst man-made humanitarian crisis.

Yemeni demining experts prepare for a controlled explosion to destroy explosives and mines laid by Houthi rebels
Yemeni demining experts prepare for a controlled explosion to destroy explosives and mines laid by Houthi rebels © Saleh Al-Obeidi/AFP/Getty Images

“A big part of the conflict has been the use by all sides, but by the Houthis in particular, of landmines,” said Peter Salisbury, a senior analyst on Yemen at the International Crisis Group.

Saudi Arabia funds humanitarian work including clearing mines in Yemen at least partly because it “clearly sees value” in bolstering local support for the military campaign and for Yemen’s internationally recognised government which it backs, he said.

SafeLane is “an apolitical organisation” that does not “partner or collaborate with any national militaries in the pursuit of their aims”, Ainsworth said.

Kowski had suggested more questions should be asked about the arrangements behind Project Masam if talks on the deal were to proceed, and Lueken had said he was concerned that the contract for the project could end if there was political change in Saudi Arabia.

A lack of transparency and oversight in state finances are “major problems” in Saudi Arabia, according to a 2020 report by Transparency International.

Ainsworth told the FT that while Saudi Arabia ultimately controlled Project Masam in Yemen, his company had a contract with a Dubai-based company, Dynasafe Middle East Project Management, to work on it.

“I invoice them,” he said. “They pay me . . . Where their money comes from, what they do, that’s their business, that’s not part of my contract.”

He said SafeLane “conducts extensive compliance checks on its counterparties” and noted Saudi Arabia was a large humanitarian aid donor to Yemen. “I believe Project Masam was a small part of that programme,” he said.

Proponents of the SafeLane deal within Novalpina argued that the company’s work in conflict zones was high-margin and a good source of cash flow, and that it could expand its work on building projects in the UK and Germany, clearing unexploded ordnance from the second world war, one of the people said.

SafeLane made pre-tax profits of $7.7mn in 2020, down from $15.4mn in 2019, its latest published accounts show.

Asked about the workers’ deaths, the company said its “thoughts and prayers are with all our lost friends and colleagues”.

“The project is operating in an ongoing armed conflict, with everchanging frontlines and terrorist activity, and has not been without incident,” SafeLane said.

Additional reporting by Andrew England

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