LV= members block US private equity takeover

Approach by Bain Capital pitted group’s leaders against campaigners and politicians in year-long battle

  • Analysis: board’s blunders buried Bain takeover

First published on Fri 10 Dec 2021 10.34 EST

Members of the mutual insurer LV= have blocked a takeover by the US private equity firm Bain Capital, scuppering a year-long campaign by the company’s board to secure backing for its preferred bidder.

Only 69% of the 174,240 members who cast ballots on Friday approved of the £530m takeover offer, whereas 75% of voting members were required to approve the deal.

The vote is a victory for critics, including MPs, campaigners and members, who were concerned about losing one of Britain’s largest mutuals and feared that transferring power to a US private equity firm would put an emphasis on short-term profits, at the expense of customer service and returns for members.

LV= said it would work “swiftly” to reassess its options, including another takeover deal that would maintain its mutual status, given members’ concerns.

That could mean potentially merging with fellow mutual Royal London, which LV= confirmed on Friday had put forward an unsolicited offer to combine the two businesses earlier this week.

In a statement Royal London said its tentative bid “will offer LV= customers the opportunity to have their life savings protected and invested by a mutual. We envisage that the terms of the merger would offer LV= members the option to become members of Royal London”.

LV= said its board “will consider this proposal seriously”. Royal London was one of the rival bidders that failed to gain the LV= board’s backing despite putting forward a higher bid worth £540m last year.

“The board has listened to member concerns about the loss of mutuality and so will in particular explore whether mutuality can be retained either on a standalone basis without undue risk to members, or through a merger with a larger mutual organisation,” LV= said, adding that it would update members in the new year.

LV= said the business would continue to serve its customers as usual in the interim, but confirmed that its chairman, Alan Cook, would be stepping down, although a date was not specified when this would happen.

Both Cook and the LV= chief executive, Mark Hartigan, had been accused of a conflict of interest by campaigners at the Association of Financial Mutuals, who said they had an interest in working for the business after Bain’s takeover. There had been speculation that both men could have lost their jobs had the board backed a rival bid. LV= denied any contract discussions between Bain and its leaders.

However, Gareth Thomas, chair of the all-party parliamentary group for mutuals, called for both Hartigan and Cook to resign immediately after the failed vote. “I want to congratulate members who have asked tough questions of the board and LV=, and exposed the weaknesses of the proposal. And I welcome Mr Cook’s departure but I think Mr Hartigan has to set a timetable for his departure too.”

Thomas added: “There are serious lessons to be learned about the way in which this proposal has been allowed to get as close to passing as it did.”

The MP has now called for an overhaul of rules governing mutuals, particularly demutualisations, as well as a review of the way City regulators the Financial Conduct Authority and Prudential Regulation Authority handled the LV= case, after both failed to intervene in the process despite pleas from campaigners and lawyers acting on behalf of concerned members.

“They should have recognised that they had extra responsibilities to the consumers of LV= because they were also the owners of the business,” Thomas said.

Bain said in a statement that despite gaining the backing of nearly 70% of LV=’s voting members, “we respect this outcome is not enough for our transaction to proceed.

“Our proposal for LV= was deemed to be the best for members, enabling LV= to grow, reduce its debt and maintain its proud heritage. It remains crucial that members are looked after and protected. We have always wanted LV= to flourish and become a leading company in the sector, that offers more consumer choice and creates more jobs.”

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