Members of LV, one of the UK’s oldest mutually owned life insurers, have rejected a takeover by private equity group Bain, in a vote hailed as a “victory for mutuality” by the MP that led political opposition to the deal.
At a meeting on Friday afternoon, 69 per cent of those voting approved the Bain offer, falling short of the three-quarters majority needed for the sale to go through. After the result was announced, LV’s chair Alan Cook said he would step down “as soon as a way forward is agreed”.
Royal London, which launched a late-stage challenge to the deal last month after falling short in last year’s bidding process, announced soon after that it had “offered to enter into immediate and exclusive discussions with LV to agree a mutual merger”.
This, it said, would give LV members the option to become Royal London members: something that was not on offer last year. LV said it would consider the proposals “seriously”.
LV, formerly known as Liverpool Victoria, traces its roots back to 1843 when its agents went door to door selling “penny policies” that would help those on modest incomes save to cover the costs of a decent funeral.
The £530m demutualisation and sale to Bain was agreed a year ago and offered a £100 payout to each LV member and more for those holding with-profits policies.
LV’s management has come under increasing pressure in recent months from pro-mutual members and politicians over the rationale for the deal and the choice of Bain.
Gareth Thomas MP, chair of the All-Party Parliamentary Group for Mutuals, told the Financial Times the result was a “victory for mutuality”. He had previously warned a yes vote could trigger a new wave of demutualisations.
“The small group of members who have asked consistently tough questions about this deal deserve congratulations for their courage and persistence in taking on the bosses of LV and Bain,” he said.
LV chief executive Mark Hartigan “needs to go”, Thomas added. LV’s board said Hartigan had its “absolute and full support”.
The Association of Financial Mutuals, a trade body, called on the board to respond to the “strong dissent” of members by taking a different path, either remaining independent or merging with another mutual.
Cook said the board was “disappointed not to have achieved the outcome that we believed was in the best interests of LV and its members”, and was “deeply appreciative” of members who had taken the time to vote. Just over 174,000 of LV’s 1.2m members took part.
LV said it would “move swiftly to reassess its strategic options and explore alternative ways to structure a transaction”, including whether mutuality could be retained “either on a standalone basis without undue risk to members, or through a merger with a larger mutual organisation.”
The deal has turned the spotlight on rules governing mutuals, which supporters believe make it too difficult for them to raise capital and too easy for them to be taken over. This week, more than 100 MPs and peers signed a letter calling for a formal review of these laws.
Demutualisations reward senior managers “very handsomely” and allow investors “to plunder assets accumulated carefully over many years”, said Angela Eagle MP, a former shadow business secretary, last month.
LV’s management had consistently argued the Bain offer was the only option for the insurer that would allow it to safeguard jobs, maintain and invest in the open business as well as providing the best financial outcome for members.
Bain said it respected that the outcome was “not enough for our transaction to proceed”, adding: “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.”