The sharks circle when the stock market becomes unstable and there is an increase in inflation.
Foreign marauder bank branches and private equity international companies begin to seek quick profit. This is what financial predators do — they sniff for easy pickings.
Bain Capital, the American takeover experts, has proposed a buyout bid.
It is now pursuing the 178 year-old LV Financial Services business, a British institution known for its Liverpool Victoria mutual societies.
Bain Capital, based in Boston, Massachusetts, plans to offer £100 to every one of the 1.2 million eligible LV members — that is, the customers who have life insurance and other policies with LV.
Lord Heseltine (pictured): Predators circling LV are offering 30 pieces of silver for an insulting and disreputable deal
Derisory
That sum, with a slightly bigger payout to members who have ‘with-profits’ policies, represents a total of 40 per cent of the proposed sale price of £530 million.
Many LV members consider the offer to be absurd.
I don’t belong to the club. However, the sale of my membership should be stopped. The £100-a-head deal on offer for members is bad enough, but it is not my primary concern.
My concern is more that of the possibility of a long-standing British corporation being liquidated and disintegrated for private profit.
It is not in national interests.
We cannot say for certain what Bain Capital’s intentions are, but we do know they will not be charitable.
Venture capitalists are there to make money and not preserve tradition or protect the interests of small investors.
We can reasonably assume that its aim is to make a sizeable profit from a company already shouldering a debt burden of £350 million.
This is a figure that has been publicly confirmed by LV’s chief executive, Mark Hartigan, who says: ‘We can’t raise any more debt because we’re maxed out.’ Mr Hartigan has said that LV does not have enough money to invest in the business to remain competitive, that if the company is left as it is, profits to savers will have to be reduced, and that the best option is to sell to the highest bidder.
Many members are somewhat sceptical of Mr Hartigan’s analysis.
The suspects believe that he will continue to work on improved terms in the case of a takeover. This could include stock benefits worth millions.
I don’t know whether such scepticism is justified in this instance, but it is an incontestable fact that private equity bidders frequently offer sweeteners to executives when planning a takeover.
A hostile buyout can be dangerous. It’s much simpler to get the board members onside.
So there’s no doubt there are a number of unanswered questions about the remuneration of executives in such takeovers.
All the information about ‘who makes how much’ should be in the public domain.
In the case of LV, there is another deeply disconcerting factor — one that should be thoroughly investigated before any deal goes through.
According to the firm’s Articles of Association, its house rules, at least half of LV’s members must respond to a ballot on the takeover, and of those voters at least three-quarters must be in favour.
This high bar is there for a very good reason — to protect the mutual from a takeover that could be to the detriment of members.
It is unlikely that it will be changed.
This is why the board filed a legal challenge to the court in an attempt to repeal the rule.
The Daily Mail’s City editor, Alex Brummer, calls this a piece of election gerrymandering worthy of Donald Trump. I agree, and I would add that it’s legal jiggery-pokery to boot.
This should not be permitted to occur until an investigation is conducted.
Financial Conduct Authority should be established now [FCA]The LV company’s behavior is monitored by the LV to see if the watchdog has any power or if it is a mere toothless monitor.
Liverpool Victoria is part of a crucial tradition woven into Britain’s social fabric, one that has helped millions of people to save and stay solvent.
It was founded in 1843 offering ‘penny policies’, with agents going door-to-door to collect very small, regular payments from working class and lower-middle class households — the homes of the decent masses, who were not wealthy but who valued their independence and their dignity.
Often, these policies were set up to pay for funerals, to avoid a pauper’s burial. Today the company provides life insurance as well as pensions and savings plans.
It was not run to make profits. Working poor people were more concerned about their own welfare than being exploited.
Aggressive
That’s why I find the Bain Capital offer so insulting and disreputable. It is the equivalent of 30 pieces of silver, which evidently translates at today’s prices to £100. All LV members should think about this before voting.
However, my worries go much deeper. We will all become poorer if this country permits predatory takeovers that swallow up our national assets one by one.
When I was president of the Board of Trade during the mid-1990s, a submission was put to me regarding two of Britain’s biggest companies, Rolls-Royce and British Aerospace.
Both of these were sought by investors who wanted to take advantage of an aggressive takeover and make a short-term profit.
But both were protected by a mechanism known as a ‘golden share’, owned by the Government.
It is not a controlling share — but it does enable the relevant secretary of state or someone else acting on behalf of the Government to block any foreign buy-out.
As I do now, I was convinced that it is vital to national security.
The idea of either Rolls-Royce or BAE in foreign hands — given the vital role they play in maintaining our defences — is unthinkable.
It could jeopardize the safety and security of the entire country.
The golden share was being pushed on me, based on false grounds that it would make these companies less able to trade.
Nearly 30 years later, it is plain that keeping the Government’s stake has had no harmful effect and has protected both industries from the vagaries of the takeover market.
LV’s chief executive, Mark Hartigan, pictured, confirmed the company is shouldering a debt burden of £350 million
Heritage
There is no reason why LV would be at risk of a takeover with a reduced price. It is imperative that the FCA does more to stop it.
Britain is the country that allows ownership of our largest companies to be free for all.
Every other country, beginning with the United States has scrutinising procedures that assess the financial consequences of takeovers and protect national interests.
The Government should conduct a worldwide survey of the regulatory regimes in all of our competitors’ economies. It must identify and follow the best practices.
We would like to see successful, large companies remain in the country. This includes British executives who make decisions about thousands of domestic workers and possibly millions of clients worldwide.
For strategic companies that work in areas such as space, defence and cutting-edge technology, this is crucial.
It does however have significant overlaps with other large corporations, particularly those that are in the financial industry.
LV, and other companies similar to it, are part our heritage. These companies must be protected.
Michael Heseltine, 1992-1995 was the president of The Board of Trade.