Insurer LV= appeals to members over £530m bid
Insurer LV= has made another attempt to persuade its 1.2 million member-customers to back a controversial £530m takeover from a US private equity firm.
A Bain Capital takeover would mean LV= losing its mutual status, with members given £100 each as part of the deal.
LV= has issued more details about the offer ahead of a vote by members, saying it saves the firm’s future as “business as usual does not work”.
The Bain deal faces a backlash from politicians and its member-customers.
Politicians from several parties have raised concerns about the prospect of LV= being bought by a US private equity firm. Some LV= members are also unhappy over the size of the possible payouts if the deal goes through.
LV=, founded in 1843 and formerly known as Liverpool Victoria, has also rebuffed an approach from a rival, Royal London.
On Monday, LV= set out a more detailed analysis of why it believed the Bain deal was best, saying to remain a standalone business would require significant investment from its members.
“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,” said David Barral, senior independent director of LV=.
“It was a decision we didn’t take lightly given our mutual heritage, but we know it is the right choice because it saves the future of LV=.”
The analysis of LV=’s position concluded that:
LV= was a sub-scale, life and pensions business with a loss-making new business unit.
The group had a “challenged” capital structure and operated in an increasingly competitive market dominated by well-capitalised, global insurers
LV= needed more than £100m of investment in IT modernisation, business operational improvements, product developments and customer service
Any new investment would have to be funded from within LV=, which could hit returns to with-profit members.
The report said a Bain deal brought the needed financial stability, and would mean a further £212m of capital being available for distribution to members, increasing the total to £616m.
LV= said: “The board received several proposals and after due diligence and negotiation, concluded unanimously… that Bain Capital offered the best outcome for LV= members, employees and other stakeholders compared to all other proposals received and all strategic options considered.”
Bosses at LV have previously said it was “grossly misleading” for Royal London to describe its proposal as a “mutual alternative”, stressing that any such deal would still lead to demutualisation.
Royal London has insisted that LV remaining a mutual “is an option” under its approach. “We do not want to break up LV and would be delighted if the LV board would engage in discussions,” it added.