The takeover of LV= by an American private equity firm has collapsed after members of the customer-owned insurer rebelled against the board’s plan for the £530 million sale.
In a humiliating blow to the bosses of LV=, who have been plotting the deal for 15 months, the group revealed that only 69 per cent of members who had participated in a vote on the deal with Bain Capital had backed the demutualisation, falling short of the 75 per cent threshold that had been required.
Alan Cook, the insurer’s chairman, immediately announced that he would stand down next year.
The failure of the Bain deal has opened the door for Royal London, LV=’s larger rival, to try to strike a deal that could preserve the insurer’s mutuality for its 1.2 million members.
Royal London — which tried to buy the group last year but lost out to Bain — has already made an approach, having put a unsolicited merger proposal to the insurer’s board on Wednesday, LV= revealed after the vote.
Advertisement
LV= said: “The proposal, which is on a substantively different structure to the offer received during the process in 2020, now includes the possibility of continued mutuality and is conditional on exclusive discussions.”
It marks a new twist on the battle for LV=’s future, which has already cost members an estimated £43 million.
Formerly known as the Liverpool Victoria Friendly Society, the group is a leading name among Britain’s mutuals, which differ from other types of business because they do not have shareholders. It can trace its roots to 1843, when it was set up in Liverpool to help families in poverty to save for the cost of funerals. The modern organisation is based in Bournemouth, employs 1,300 staff and is a leading provider of life assurance and pensions products.
Cook and Mark Hartigan, the insurer’s chief executive, have faced a backlash over their decision to demutualise the business ever since December last year, when they first formally agreed the sale to Bain.
Critics attacked the £100 payouts that each of LV=’s members would have received from the deal as being too low, while others questioned the transparency of the sale process and the suitability of a private equity firm to own the 178-year-old group.
Advertisement
Another sticking point had been LV=’s plan to scrap one of its main rules of association that stipulates a turnout of at least 50 per cent at any member vote leading to demutualisation. In the event, only 15 per cent of the insurer’s 1.16 million members participated in the vote on the Bain deal. A separate vote on changing the rule also failed to pass the 75 per cent threshold, with only 69 cent of members backing it.
Gareth Thomas MP, who has led a political campaign to stop the Bain deal, said he was delighted with the outcome and added that Hartigan, as well as Cook, should stand down immediately. “Hartigan has got to go too, and immediately, and they both should be replaced by people committed to a mutual future for LV=. A small group of members have succeeded in persuading enough members to reject the deal. That’s remarkable because boards hold all the cards.”
Peter Bloxham, a solicitor and LV= member at the forefront of the revolt against the Bain sale, said: “They just misjudged the mood of their members.”
Bain said: “While approximately 70 per cent of LV=’s members voted for our proposal, we respect this outcome is not enough for our transaction to proceed.”
https://news.sky.com/story/high-street-banks-commit-to-cash-access-guarantee-amid-branch-closures-row-12491907 Cook and Hartigan have argued that LV= is in need of investment and that the best way to secure capital is from a third party such as Bain. Cook said the LV= board was “committed to finding a solution to the challenges presented by a declining with-profits membership base”, and added: “I will continue to lead the process to find a way forward that will enable us to provide the right financial outcome for all our members while respecting their different wishes. However, I also confirm that as soon as a way forward is agreed that I intend to step down as chair.”
Advertisement
Royal London said: “We are confident there will be exciting opportunities for colleagues within both Royal London and LV= as part of a larger, well-capitalised and growing mutual. We hope to agree a proposal that Royal London can recommend to our members.” It added, however, that there was no certainty a deal would be reached.
