Can anyone stop LV= being taken over by Bain – and why is it controversial?

When retired teacher Duncan McGibbon heard that LV=, the pensions and life insurance mutual, was being bought by private equity giant Bain, he took matters into his own hands.

McGibbon, 72, 推出 a petition on calling on City regulators to block the demutualisation of the 178-year-old firm and its sale to US private equity house Bain Capital for £530m.

McGibbon is one of 1.2 million members who stand to receive about £100 each if the deal goes through, something he said was an “insult”.

A member for about a decade, he believes they have been left in the dark about a rival bid by mutual Royal London as well as what LV=’s chief executive and chairman may gain from choosing Bain over rival suitors. So far his petition has gained about 190 signatures.

“What I’m doing is pointing out that mutualisation is a vital dimension to what I would call the moral economic life of this country,“ 他说. “We stand to lose an awful lot if firms such as a Bain, a private investment company, [是] only interested in absorbing capital credit and then selling it off. They have absolutely no moral interest whatsoever in LV=.”

The deal has inflamed the debate about takeovers of British companies by private equity giants.

What is LV=?

LV= is a pensions and life insurance mutual originally known as Liverpool Victoria. It was founded in 1843 with the original aim of allowing Liverpool’s poor to cover burial costs.

It has roughly 1.2 million members, 297,000 of which are “with-profits” policyholders, meaning they tend to receive payouts based on the performance of the business, and legally own LV= collectively.

What is happening with the mutual?

在十二月 2020, LV= announced plans to sell itself to Bain Capital in a £530m deal that would see it abandon its status as a mutual owned by its member-customers, and instead hand ownership to the private equity firm.

The group’s board considered a similar bid from fellow mutual Royal London, which reportedly offered a similar amount to Bain. While the terms of the offer have not been disclosed, an LV= spokesperson claimed that members – particularly with-profits policyholders – would similarly lose voting rights and ownership status even if the deal with Royal London had been backed by the board.

The Bain deal will now be put to members on 10 十二月.

Why is the company selling itself to Bain?

The company said its board had been considering three options for the business, which had been struggling to secure capital for investments due to restrictions on fundraising imposed on mutuals linked to a cap on debts. Those options included selling the business, continuing business as normal, or winding down operations.

LV= has argued that the deal with Bain provides the highest returns for members, “more than staying as we are today or closing to new business,”一位发言人说.

The firm’s members qualify for a cash payout worth £100 each in exchange for converting the mutual. With-profits members will share another £101m between themselves, offering individuals anywhere from £50 to £600 based on the length and size of their policy.

Why are people upset about the deal?

LV has said the Bain deal is “solely driven by the long-term interests” of members.

然而, concerns have been raised by some of members as well as cross-party politicians including former deputy prime minister Lord Heseltine, Labour MP Margaret Hodge, and Tory peer Ros Altmann, who are concerned about the motivations and repercussions of the deal with Bain.

Gareth Thomas, Labour’s shadow minister for international trade and chair of all-party parliamentary group on mutuals, said members would lose out “as demutualisation always leads to worse payouts and poorer customer service”.

He joins a growing chorus of MPs and unions concerned about the wave of private equity takeovers aimed at UK firms, saying private equity firms’ focus on profits could result in stripping companies of their assets and loading them with debt, before selling them off within years of the deal.

然而, both LV= and Bain said said there was no additional debt being issued as part of this transaction and debt levels of LV= would not increase.

Bain Capital said the takeover offer was “based on our conviction that there is a tremendous opportunity to grow the company further over the long-term, which would result in better choices for members, jobs and a strengthened market position”.

Thomas also raised questions over whether LV= chairman Alan Cook and chief executive Mark Hartigan chose Bain over Royal London, claiming they would stand to gain financially due to share deals and salaries. An LV= spokesman denied that either of the men stood to benefit personally from the deal.

What happens now?

There is less than a month left before LV= members are asked to vote on the deal.

这 10 December vote will comprise two parts. The first will be whether to approve the deal, while the second is how the transaction is executed: either fully transferring the business to Bain, or ring-fencing the old business and allowing Bain to conduct new business under the LV= name.

Campaigners are also concerned that both votes will only require approval from 75% of members who vote, with no quorum – meaning there is not a minimum threshold on the number of members who are required to cast their ballot to ensure it is valid.

LV= plans to hold three webinars for members to ask the company questions on 22, 29 November and 3 December ahead of the vote, though media are barred from attending.

Can anyone stop the Bain deal?

Options appear to be dwindling for campaigners who oppose the Bain deal. LV= says the board has entered into legally binding agree with Bain that means no other deal can be put to members before the 10 December vote.

If members vote against the proposal it will not go to the next stage. 然而, if it is approved, it will still have to go to UK financial regulators and a judge, which will have to formally approve the deal.

The Financial Conduct Authority said last month that it did not intend to block the takeover or plans to demutualise the firm.

It is understood that neither the FCA or the PRA are required to consider ownership structures when assessing takeovers, and are instead focused on consumer protection and competition in the interest of members.