Bain Capital’s offer to buy the society in private equity hands should make LV members wary.
Irrespective of their credibility, the advocates of the deal – LV chief executive Mark Hartigan and former Post Office managing director Alan Cook – have not come clean with policyholders. The facts are muddled, and this has been made worse by the disclosure of secrets contacts with Royal London.
One of the most important aspects of UK company law, corporate governance and bid documents is the need for thorough disclosure. Although potential and existing investors may not like it, at the very least it’s possible to thoroughly explore both pros and cons.
Silence is golden: LV chief executive Mark Hartigan and former Post Office managing director Alan Cook have not come clean with policyholders
Take the recent £7billion takeover of Morrisons by private equity barons Clayton, Dubilier & Rice. The bid was opposed by many. This would result in fat cat payments for David Potts, chief executive. It could pose a threat to Britain’s food safety over the long-term. The private equity model could also cause the Grocer to take on so much debt, that it would be detrimental for staff, suppliers, and other stakeholders.
They are however known inconsistencies when it comes to LV’s deal with colossus Bain Capital. Any questions requiring more detail will be met with silence. When Hartigan is publicly questioned about his own potential rewards, should LV end up in new equity ownership, there is obfuscation as to how he could benefit by millions of pounds.
Compare this to the Morrisons sale. In the process of the bid battle, buyer CD&R and its rival Fortress were required to put everything into the public domain.
It went far beyond what was legal to include statements about future employment, headquarters, as well as agreements with trustees of the target’s pension funds. These statements are crucial because any company that falls under the control of private equity will weaken their ‘covenant.
Bain Capital’s proposal for Liverpool Victoria raises a lot of questions. According to our sources, Alan Cook and his associates considered 12 different offers before they decided on Bain Capital. A similar approach by Royal London was also not as successful.
At Morrisons, directors and shareholders had to hand most of the detail they needed to make a judgement. Full transparency was provided. The voting members of LV are the policyholders. They were not privy to reliable data.
How exactly were these terms rejected in the Royal London potential deal? Is there a possibility of a collaborative approach?
When it comes to the transfer of ownership of public corporations, we also don’t have all of the necessary information. What is the exact cost of financing this deal? Directors and executives are expected to receive a large sum of money and they will continue their role.
In most cases, there will be a requirement to break down fees paid by advisers in bids or deals. Putting to one side potential conflicts of interest of Fenchurch boss Malik Karim in the £530m LV deal, we can only guess at his firm’s payment. In takeovers, IPOs and IPOs advisory fee are paid in full. They are paid using shareholders’ cash. In the case of LV, it’s policyholder money. All members are entitled to this information.
If LV were to be honest about all of it, this would make things much easier. It will be difficult to believe that there are skulduggery and other ploys unless that occurs.
Get your opinion heard at LV
We are encouraging LV members, customers, or others, who would like to see it retain its mutual status, rather than be bought out by private equity, to write to it.
The wording of the Daily Mail’s City pages letter could be used (pictured below).
Below are the words that you can copy and paste in a letter.
You can send it to Alan Cook (Chairman of LV=), Liverpool Victoria County Gates Bournemouth BH1 2NF
Dear Alan Cook,
I urge you, the undersigned to reconsider your decision of selling LV= to Bain Capital. Instead, keep it in its mutual status.