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

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

72-year-old McGibbon launched a petition on Change.org calling on city regulators to block the demutualization of the 178-year-old company and its sale to US private equity firm Bain Capital for £ 530 million.

McGibbon is one of 1.2 million members who will each receive around £ 100 if the deal goes through in what he termed an “insult”.

He has been a member for about a decade and believes they have been left in the dark about a competing offer from the joint Royal London, as well as what the board chairman and chairman of LV = could benefit from voting for Bain over competing suitors. So far, his petition has received around 190 signatures.

“I point out that communitarization is an essential dimension of what I would call the moral economy of this country,” he said. “We will lose a lot if companies like Bain, a private investment company, [are] only interested in borrowing capital and then selling. You have absolutely no moral interest in LV =. “

The deal sparked the debate over the takeover of British companies by private equity giants.

What is LV =?

LV = is a pension and life insurance mutual that was originally known as Liverpool Victoria. It was founded in 1843 with the original aim of providing funeral expenses for the Liverpool poor.

It has around 1.2 million members, of which 297,000 are with-profits policyholders, which means they typically receive payouts based on the company’s performance and legally own LV =.

What happens to the reciprocity?

In December 2020, LV = announced plans to sell itself to Bain Capital as part of a £ 530 million deal.

The group’s board of directors considered a similar offer from Royal London, which Bain reportedly offered a similar amount. Although the terms of the offer were not disclosed, a LV = spokesman claimed that members – especially with-profits policyholders – would similarly lose voting rights and ownership status even if the deal with Royal London had been endorsed by the board of directors.

The Bain deal will now be presented to members on December 10th.

Why is the company selling to Bain?

The company said its board of directors was considering three options for the company, which was struggling to raise capital for investments due to fundraising restrictions imposed on mutuals related to a debt ceiling. These options included selling the business, continuing to operate normally, or terminating the business.

LV = has argued that the deal with Bain offers members the highest returns, “more than just staying the way we are today or getting involved in new business,” a spokesman said.

Members of the firm qualify for a cash payment of £ 100 each in exchange for the mutual conversion. With-profits members split an additional £ 101m and offer individuals between £ 50 and £ 600 depending on the length and scope of their policy.

Why are people upset about the deal?

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

However, some members, as well as bipartisan politicians like former Deputy Prime Minister Lord Heseltine, Labor MP Margaret Hodge and Tory colleague Ros Altmann have raised concerns about the motivations and implications of the deal with Bain.

Gareth Thomas, Labor Party’s shadow minister on international trade and chairman of the parliamentary group on mutuals, said members would lose “as demutualization always leads to poorer payouts and poorer customer service.”

He joins a growing chorus of MPs and unions concerned about the wave of private equity buyouts for UK companies in the deal.

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

Bain Capital said the tender offer “is based on our belief that there is a tremendous opportunity for the company to grow over the long term, which would result in better membership choice, jobs and a strengthened market position.”

Thomas also questioned whether LV = Alan Cook chairman and board chairman Mark Hartigan voted Bain over Royal London, claiming they would win financially on the basis of stock deals and salaries. A spokesman for LV = denied that any of the men would personally benefit from the deal.

What’s happening now?

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

The vote on December 10th consists of two parts. The first will be whether to approve the transaction, while the second is how the transaction will be carried out: either transfer the deal entirely to Bain, or delineate the old deal and allow Bain to open new deals under the LV = name to do.

Activists also fear that both votes will only require the approval of 75% of the voting members without a quorum – meaning there is no minimum limit on the number of members who have to cast their vote to ensure it is valid.

LV = plans to hold three member webinars on November 22, 29, and December 3, prior to voting, to ask questions of the company, although media are excluded from participation.

Can someone stop the bain deal?

For activists who oppose the Bain deal, options seem to be fading. LV = says the board has entered into a legally binding agreement with Bain that means no other deal can be presented to members before the December 10th vote.

If the members vote against the proposal, it will not be admitted to the next phase. However, if it’s approved, it still has to go to UK financial regulators and a judge to officially approve the deal.

The Financial Conduct Authority announced last month that it had no intention of blocking the acquisition or demutualizing the company.

It goes without saying that neither the FCA nor the financial services regulator PRA have to take ownership structure into account when assessing takeovers, but rather focus on consumer protection and competition in the interests of the members.