Finance

LV= board defends accepting £530m takeover bid from Bain Capital


The board of insurance group LV= has defended its decision to accept a proposed £530m takeover bid from a US private equity group.

Directors at the 178-year-old mutual, formerly known as Liverpool Victoria, have advised its 1.2 million customer members to approve the offer from Bain Capital.

The Bournemouth-headquartered company’s senior leadership has said the deal would be the “best financial outcome” for its members, and would provide the required investment it needs to compete with insurers with access to big capital in the competitive life and pensions market.

LV= has said that under the proposed deal Bain will invest £212m and hand out £533m to 271,000 LV= main fund with-profit members.

Eligible members could receive £100 one-off payments from the proposed sale, while eligible “with-profits” members with long-term investment products could receive enhanced payouts.

The move has been criticised as a “betrayal” by some members and campaigners, who have claimed it could result in lower payouts and poorer customer service.

Shadow Business Secretary Ed Miliband and former Chancellor Michael Heseltine have also voiced concerns about the deal.

LV= has argued that if it used internal capital to fund its growth ambitions, the majority of members holding eligible with-profits policies would be unlikely to benefit due to their policies maturing before LV= sees the returns on that investment. Under the proposals, it is Bain Capital that would fund the investment with the £530m deal.

On Monday (November 22) LV= said the deal was the only option to keep the business running, as it attempted to show its workings.

Senior independent director David Barral said: “Our board carried out a careful and detailed strategic review of LV= in 2020.

“We examined all the options, drawing on our own wide business and transaction experience and that of our professional advisers.

“We all came to the firm conclusion it would not be fair for us to ask our With-profit members to finance a future that requires significant investment, which many would not benefit from.”

The firm said that trying to continue running a “business as usual” strategy was not fair for members given the need for investments, with more than £100m needed to upgrade systems and customer services.

Chairman Alan Cook added: “There have been numerous theories and opinions about the process and decision.

“So that members can vote with the facts in front of them, we are showing the analysis we did and the conclusions we reached.”

He pointed out that LV=’s sale of its general insurance business to Allianz for £1.1bn to prop up the organisation was not enough for the life and pensions business to run successfully.

The company attempted to defend the £100 payment to members, claiming the full amount being returned to them will be £533m “over time”, as opposed £404m under a “business as usual” position if it remained successful.

The board said it had received 12 bids for the business and had “unanimously” accepted the offer from Bain, which has around £110bn of assets under management and offices around the world.

LV= bosses said the US firm would be the only one to preserve the mutual’s “brand, heritage and values”, including its offices in Bournemouth, Hitchin and Exeter.

LV= chief executive Mark Hartigan last week described a rival bid from fellow mutual Royal London as a “hand grenade” attempting to derail the deal with Bain ahead of a vote from LV= members.

Royal London said the proposed agreement with Bain would see the business split up and result in redundancies.

Mr Hartigan said he was “disappointed” by the timing of Royal London’s move and urged members to back Bain’s deal.

Mr Hartigan said: “Royal London had every opportunity to offer a better deal than Bain and they didn’t.”

LV= members will be asked to have their say on December 8 or at an online meeting on December 10, with 75% of votes needed to back the takeover and a minimum turnout of 50%

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