The war of words over Bain Capital’s planned takeover of LV is heating up, with both parties and rival bidder Royal London broadcasting their positions as voting gets under way on the sale of one of the UK’s oldest mutually owned life insurers.
Pressure is mounting on the deal ahead of next month’s voting deadline, with senior politicians and some members publicly expressing concerns about the demutualisation, and asking why the private equity group was chosen over fellow mutual Royal London in last year’s bidding process. Gareth Thomas, an MP who is a leading opponent of the deal, has called for an “honest debate about the virtue of both bids”.
Royal London upped the ante last week, proposing splitting up LV in a three-way deal with Bain. The group said on Sunday that it was “ready to explore any option that delivers a better member outcome, including options that would allow LV members to become members of Royal London”.
LV issued a lengthy statement on Tuesday explaining why it felt a sale of the business was the best route for members and why Bain’s £530m offer was chosen over Royal London’s £540m proposal and other bidders last year.
Unlike Bain, Royal London was “proposing to leave material liabilities in respect of the non-profit business” with LV’s with-profits members, LV said, confirming a Financial Times report on Saturday.
Royal London’s offer also included “higher and less certain administration and investment management costs”, making it worse value for LV members on a like-for-like basis, it added.
LV said the Royal London proposal would have led to significant job losses as part of the latter’s “value creation” and offered no commitment for two of LV’s locations. Bain has previously committed to “support . . . an ongoing presence across LV’s three UK sites”.
LV also said it was “surprised and disappointed” that Royal London declined its request to “progress its due diligence investigations during the final stages of the process”.
Responding to the latest communication from Royal London, LV said its board continued to unanimously recommend the Bain offer rather than “dismantling” the group.
“The board of LV is clear that at no point have any of Royal London’s proposals included an offer for membership rights or continuation of mutuality for LV members, contrary to media speculation,” said LV’s chair Alan Cook.
Royal London did not respond immediately to a request for comment. However, its chief executive Barry O’Dwyer told BBC Radio 4’s Today programme on Tuesday that “we think they should do everything possible to retain [mutual] status”.
“My message to LV is, let’s talk, there must be a better way. I think there is a significant risk that LV members will reject this [Bain] deal,” he said.
He added that it was not “credible” that LV members and outside observers would believe that member benefits and LV jobs were best protected under private equity ownership.
Bain stressed in a media statement on Monday its “long-term commitment” to LV, pledging £160m of investment in IT, operations, product development and customer service, to be funded from operating cash flows. The group also said it aims to increase LV’s policyholder numbers from 1.2m to 2m.
Bain said no new debt will be added to LV as part of the transaction and that the target’s debt will be reduced at the first available redemption date.
