Sec Form 13D Filing - WHITE MOUNTAINS INSURANCE GROUP LTD (WTM) filing for MediaAlpha Inc. (MAX) - 2023-06-30

Item 3. Source and Amount of Funds or Other Consideration.

In preparation for the Issuer’s initial public offering (the “IPO”) on October 30, 2020, White Mountains and its controlled affiliates participated in a reorganization, pursuant to which White Mountains caused Guilford Holdings, Inc. (“Intermediate Holdco”), its then wholly owned direct subsidiary, to distribute or otherwise dispose of all of its assets other than certain deferred tax assets and liabilities and the class A-1 units of QL Holdings LLC held directly by Intermediate Holdco at such time and, thereafter, the Issuer, QL Holdings LLC, White Mountains, Intermediate Holdco and other members of QL Holdings LLC consummated a series of reorganization transactions set forth in a reorganization agreement among such parties, the form of which was filed as an exhibit to the form S-1 registration statement of the Issuer filed with the Commission on October 20, 2020.  Pursuant to the reorganization agreement, White Mountains contributed all of the outstanding capital stock of Intermediate Holdco to the Issuer in exchange for 24,142,096 Class A Shares (of which 23,242,096 Class A Shares were distributed to WMI Lux and 900,000 Class A Shares were distributed to Bridge Holdings (Bermuda) Ltd., then a wholly owned direct subsidiary of White Mountains (“Bridge Holdings”)) and the right to certain payments under a tax receivables agreement among White Mountains, QL Holdings LLC, the Issuer and certain holders of Class B-1 units (“Class B-1 Units”) of QL Holdings LLC, such that Intermediate Holdco became a wholly owned direct subsidiary of the Issuer and the Issuer became a holding company with its sole material asset being all of the shares of Intermediate Holdco.  In the IPO, WMI Lux sold 3,609,894 Class A Shares and received total proceeds of approximately $64 million.  Immediately following the closing of the IPO, Bridge Holdings directly held 900,000 Class A Shares, and WMI Lux directly held 19,632,202 Class A Shares, and, therefore, White Mountains beneficially owned 20,532,202 Class A Shares.

Subsequently, on March 23, 2021, WMI Lux sold 3,592,204 Class A Shares and on August 25, 2022, Bridge Holdings merged into White Mountains with White Mountains surviving, resulting in White Mountains directly holding Bridge Holdings’ 900,000 Class A Shares and beneficially owning an additional 16,039,998 Class A Shares directly held by WMI Lux.

On June 30, 2023, WM Hinson purchased 5,916,816 Class A Shares (the “Purchased Shares”), at a price per Class A Share of $10.00, for an aggregate purchase price of $59,168,160 pursuant to an Offer to Purchase, dated as of May 26, 2023, and filed on Schedule TO with the Commission on May 26, 2023.  WM Hinson used available cash on hand to fund the aggregate purchase price for the Purchased Shares, including all fees and expenses related thereto.

Item 4. Purpose of Transaction.

The information set forth or incorporated by reference in Items 2, 3, 5 and 6 is hereby incorporated by reference in this Item 4.

The Reporting Persons acquired the Class A Shares held by them for investment purposes.

The Reporting Persons intend to review their investment in the Issuer on a continuing basis and, from time to time, may take actions with respect to such investment or the Issuer, including communicating with the Issuer’s board of directors, members of management or other securityholders of the Issuer, or other third parties from time to time, taking steps to implement a course of action regarding such investment or the Issuer, including, without limitation, engaging advisors, including legal, financial, regulatory, technical or industry advisors, to assist in any such review, and evaluating strategic alternatives as they may become available. Such discussions and other actions may relate to or result in, subject to the terms and conditions of the agreements described herein to which the Reporting Persons are a party, various alternative courses of action regarding such investment or the Issuer, including, without limitation, one or more of the actions described in clauses (a) through (j) of Item 4 of Schedule 13D.

Such discussions and actions may be preliminary and exploratory in nature, and not rise to the level of a plan or proposal. Subject to the terms and conditions of the agreements described herein to which the Reporting Persons are a party, the Reporting Persons or their affiliates may, in the future, seek to make additional investments in the Issuer and its subsidiaries, including the acquisition of additional Class A Shares or other equity, debt or other financial instruments related to the Issuer or the Class A Shares (which may include rights or securities exercisable or convertible into securities of the Issuer), or sell or otherwise dispose of some or all of such Issuer securities or financial instruments (which may include transfers to such Reporting Person’s affiliates) from time to time, in each case, in open market or private transactions, block sales or otherwise. Any transaction that any of the Reporting Persons or their affiliates may pursue, subject to the terms and conditions of the agreements described herein to which the Reporting Persons are a party, may be made at any time and from time to time without prior notice and will depend on a variety of factors, including, without limitation, the price and availability of the Issuer’s securities or other financial instruments, the Reporting Persons’ or such affiliates’ trading and investment strategies, subsequent developments affecting the Issuer, the Issuer’s business, financial position, prospects and strategic direction, actions taken by the Issuer’s board of directors, other investment and business opportunities available to such Reporting Persons and their affiliates, general industry and economic conditions, the securities and insurance markets in general, tax considerations and other factors deemed relevant by such Reporting Persons and such affiliates.

Under the Stockholders’ Agreement (as defined below), White Mountains, through its affiliate WMI Lux, is entitled to designate two individuals for nomination to the Issuer’s board of directors, and the other Stockholders’ Agreement Parties (as defined below) have agreed to vote their Shares (as defined below) in favor of such designees, as further described below. WMI Lux has agreed in the Stockholders’ Agreement to vote its Class A Shares for the nominees of the other Stockholders’ Agreement Parties. As of the date on the cover page of this Schedule 13D, Christopher Delehanty, the Head of Corporate Development / M&A of White Mountains, and Jennifer Moyer, Chief Administrative Officer of White Mountains, are White Mountains’ designees on the Issuer’s board of directors.  Mr. Delehanty and Ms. Moyer may engage in discussions with the Issuer and the Issuer’s management, other members of the Issuer’s board of directors, other stockholders of the Issuer and other interested parties that relate to the business, management, operations (including cost structure), assets, capitalization, financial condition, strategic plans, governance and board composition and the future of the Issuer.  Steven Yi is a member of the board of directors of White Mountains, the Chief Executive Officer of the Issuer and a member of the Issuer’s board of directors.  As Chief Executive Officer of the Issuer, Mr. Yi manages the business of the Issuer, including operations and strategic plans, subject to oversight by the Issuer’s board of directors.

Except as disclosed herein, none of the Reporting Persons nor, to the knowledge of the Reporting Persons, any of the individuals listed on Annex A, have any present plans or proposals to take any actions described in clauses (a) through (j) of Item 4 of Schedule 13D.

Item 5. Interest in Securities of the Issuer.

The table below sets forth, based on the knowledge of the Reporting Persons, the beneficial ownership of the Class A Shares of the persons listed in Annex A, as of the date of this Schedule 13D.

(1)	Assuming the exchange of any Class B Shares beneficially owned, together with a corresponding number of Class B-1 Units, for a number of Class A Shares equal to the number of Class B Shares exchanged, pursuant to the Exchange Agreement (as defined below).
(2)	Represents the percentage of Class A Shares beneficially owned, as calculated in accordance with Rule 13d-3(d)(1)(i) under the Exchange Act. The calculation is based on 45,840,803 Class A Shares issued and outstanding as of May 31, 2023, as reported on the Issuer’s Schedule 14D-9 filed with the Commission on June 9, 2023.
(3)	OBF Investments, LLC a Nevada limited liability company (“OBF”) holds 3,923,885 Class B Shares. OBF Investments is owned by trusts for the benefit of Mr. Yi and members of his family. Mr. Yi does not have any voting or dispositive control over the shares held by OBF. See the Schedule 13D filed by OBF and its Manager, Jason Heiling, on June 25, 2021, for additional information with respect to OBF.

By virtue of the relationships described under Item 2 of this Schedule 13D, each of White Mountains and WM Birkdale may be deemed, for purposes of Rule 13d-3 under the Exchange Act, to share the power to vote or dispose, or to direct the voting or disposition of, the Class A Shares directly held by WMI Lux, and in addition, White Mountains may be deemed, for purposes of Rule 13d-3 under the Exchange Act, to share the power to vote or dispose, or to direct the voting or disposition of the Class A Shares directly held by WM Hinson.

Each of the Reporting Persons disclaims membership in a group with each other Reporting Person.  The filing of this Schedule 13D shall not be construed as an admission that any Reporting Person is the beneficial owner of any of the Class A Shares that such Reporting Person may be deemed to beneficially own.  Without limiting the foregoing sentence, all of the Reporting Persons, other than with respect to Class A Shares directly held by such Reporting Person as described on each cover page to this Schedule 13D, disclaim beneficial ownership of all Class A Shares reported in this Schedule 13D.  In addition, the filing of this Schedule 13D shall not be construed as an admission that any partner, member, director, officer or affiliate of any Reporting Person is the beneficial owner of any of the Class A Shares that such partner, member, director, officer or affiliate may be deemed to beneficially own.

In addition, because of the relationships among White Mountains and WMI Lux, on the one hand, and the other Stockholders’ Agreement Parties, on the other hand, as a result of the Stockholders Agreement, the Reporting Persons may be deemed, pursuant to Rules 13d-3 and 13d-5 under the Act, to beneficially own the Class A Shares, Class B Shares or Class B-1 Units held in aggregate by the other Stockholders’ Agreement Parties.  Notwithstanding the foregoing, the filing of this Schedule 13D shall not be construed as an admission that any Reporting Person is the beneficial owner of any of the Class A Shares, Class B Shares or Class B-1 Units that such Reporting Person may be deemed to beneficially own.  Further, each of the Reporting Persons disclaims membership in a group with each other Stockholders’ Agreement Party.

Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer.

Registration Rights Agreement:  In connection with the IPO, WMI Lux and certain other investors (including Mr. Yi) entered into a registration rights agreement, dated as of October 27, 2020 (the “Registration Rights Agreement”), with the Issuer that provides WMI Lux and such other investors, subject to certain conditions and limitations, certain rights, including demand registration rights, shelf registration rights and piggyback registration rights, with respect to Class A Shares beneficially held by White Mountains at the time of the IPO.  WMI Lux is not entitled to registration rights with respect to the Purchased Shares.

The foregoing description of the Registration Rights Agreement is not complete and is qualified in its entirety by reference to the Registration Rights Agreement, which is filed as Exhibit 99.2 hereto.

Exchange Agreement:  In connection with the IPO, the Issuer entered into an exchange agreement, dated as of October 27, 2020 (the “Exchange Agreement”), with QL Holdings LLC, Guilford Holdings, Inc. and the holders of Class B Shares, which agreement provides that holders of Class B Shares may exchange such Class B Shares, together with a corresponding number of Class B-1 Units, for a number of Class A Shares equal to the number of Class B Shares exchanged.  None of the Reporting Persons is party to the Exchange Agreement.

The foregoing description of the Exchange Agreement is not complete and is qualified in its entirety by reference to the Exchange Agreement, which is filed as Exhibit 99.3 hereto.

Stockholders’ Agreement:  In connection with the IPO, WMI Lux, Insignia QL Holdings, LLC, Insignia A QL Holdings, LLC (collectively with Insignia QL Holdings, LLC and any of their respective permitted affiliate transferees, “Insignia”), Steven Yi, Eugene Nonko and Ambrose Wang (collectively with Mr. Yi and Mr. Nonko and each of their respective holding vehicles through which such persons indirectly hold their investment stock and their respective permitted affiliate transferees, the “Founders”) entered into a stockholders’ agreement, dated October 27, 2020 (the “Stockholders’ Agreement”), with the Issuer.  WMI Lux, Insignia and the Founders are collectively referred to herein as the “Stockholders’ Agreement Parties”. The Stockholders’ Agreement contains provisions related to the composition of the Issuer’s board of directors, the committees of the Issuer’s board of directors and the Issuer’s corporate governance.

Under the Stockholders’ Agreement, WMI Lux and the other investors party to the Stockholders’ Agreement are collectively entitled to nominate a majority of the members of the Issuer’s board of directors. Specifically, for so long as WMI Lux beneficially owns at least 12.5% of the Issuer’s issued and outstanding Shares, WMI Lux will be entitled to nominate two directors to serve on the Issuer’s board of directors. When WMI Lux beneficially owns less than 12.5% but at least 5% of the Issuer’s issued and outstanding Shares, WMI Lux will be entitled to nominate one director. WMI Lux has agreed in the Stockholders’ Agreement to vote for the nominees of the other Stockholders’ Agreement Parties. In addition, the Founders and Insignia have agreed to vote their Shares in favor of White Mountains’ board nominees. 

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Exhibit No.		Description
99.1		Joint Filing Agreement, dated as of June 30, 2023, among the Reporting Persons.
99.2		Registration Rights Agreement, dated October 27, 2020, by and among MediaAlpha, Inc., White Mountains Investments (Luxembourg) S.à r.l., Insignia QL Holdings, LLC, Insignia A QL Holdings, LLC, Steven Yi, Eugene Nonko, Ambrose Wang and certain other parties thereto (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed with the SEC on November 2, 2020, by MediaAlpha, Inc.).
99.3		Exchange Agreement, dated October 27, 2020, by and among MediaAlpha, Inc., QL Holdings LLC, Guilford Holdings, Inc. and holders of Class B-1 Units party thereto (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed with the SEC on November 2, 2020, by MediaAlpha, Inc.).
99.4		Stockholders Agreement, dated October 27, 2020, by and among MediaAlpha, Inc., White Mountains Investments (Luxembourg) S.à r.l., Insignia QL Holdings, LLC, Insignia A QL Holdings, LLC and Steven Yi, Eugene Nonko and Ambrose Wang, together with their respective holding entities through which they indirectly hold common stock of MediaAlpha, Inc. (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed with the SEC on November 2, 2020, by MediaAlpha, Inc.).

ANNEX A

CERTAIN INFORMATION REGARDING THE EXECUTIVE OFFICERS AND DIRECTORS OF THE REPORTING PERSONS

The name and principal occupation of (a) each executive officer and director of the Reporting Persons; (b) each person controlling the Reporting Persons; and (c) each executive officer and director of any corporation or other person ultimately in control of the Reporting Persons are set forth below.  The following sets forth with respect to each of the individuals listed below such person’s (i) name, (ii) citizenship and (iii) if currently employed, present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment or occupation is conducted other than a White Mountains Organization entity.  Each of the individuals listed below for whom a business address is not listed has a business address c/o White Mountains Insurance Group, Ltd., 23 South Main Street, Suite 3B, Hanover, New Hampshire 03755, except Mr. Pearson and Ms. Brown have a business address c/o White Mountains Insurance Group, Ltd., 26 Reid Street, Suite 601, Hamilton HM 11, Bermuda.

Within this Annex A, the term “White Mountains Organization” is used to refer to one or more entities within White Mountains’ consolidated group.

White Mountains Insurance Group, Ltd.

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WM Birkdale, Ltd.

White Mountains Investments (Luxembourg) S.à r.l.

WM Hinson (Bermuda) Ltd.